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Youth wage subsidy in the spotlight.
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February 2013

Youth wage subsidy in the spotlight.

First mooted by Finance Minister, Pravin Gordhan, in 2010, the youth wage subsidy is an effort to alleviate the plight of young, inexperienced and unemployed young people, who are among the hardest hit by high unemployment rates in South Africa.

The spotlight was clearly set on the youth wage subsidy during the recent ANC Lekgotla, where the long awaited development initiative was given tacit approval. However, this notion was contradicted by COSATU deputy Secretary General, Bheki Ntshalintshali, who recently told SABC 2 that the wage subsidy will never be implemented.

Although this is another mixed signal from the ruling alliance, the youth wage subsidy is widely anticipated to be given the green light, with both President Zuma and Minister of Finance, Pravin Gordhan, set to provide an update on this topic in this months’ State of the Nation address and Budget Speech respectively.

“The national debate on unemployment and the youth is fertile ground for the country to collectively develop a model to improve the socio-economic position of its future solution - the youth,” comments Professor Sharon Smulders, Head of Tax Policy and Research at the SA Institute of Tax Practitioners (SAIT).

SAIT submitted a formal proposal to National Treasury in November last year, recommending that the current strict learnership tax incentive allowance in the Income Tax Act be amended and relaxed to motivate skills development through internships and artisan training. "This will ensure that the wage subsidy is linked to a tax incentive, rather than a cash subsidy, thereby securing tangible and long lasting learning outcomes, and not merely resulting in the crippling of the youth", says Smulders.

ANC Party secretary-general, Gwede Mantashe, last week publicly agreed that the Government must never dish out money to the private sector to absorb new entrants into the job market; “Instead of subsidising companies to employ young people, the new Youth Employment Support and Incentive Scheme would look for other ways of offering incentives to not only private companies but “anybody", including Further Education and Training colleges that help to stem the tide of youth unemployment.”

Professor Sharon Smulders agrees that giving money to the business sector to absorb new entrants into the job market will be a mistake; "South Africa is in a dire need of skilled labour. The policy to assist the youth is a good one. However, the wage subsidy should be linked to the transfer of skills, and hence be outcomes driven. Professor Smulders adds, "There is pertinent wisdom in the axiom, give a man a fish and you feed him for a day; teach a man to fish, and you feed him for a lifetime. The youth need the tools to secure their own future, which in this case is education and training. South Africa cannot afford subsidies that create inflation, without tacit proof and viable return on investment.

ENDS 476 words

For more information contact;
Dayne Stern
T: +27.21.424.0470,
F: +27.21.423.1594,
M: +27.81.450.4380


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