With matriculants hoping to enter the labour market soon, the Southern Africa Labour and Development Research Unit at the University of Cape Town says the tax subsidy is a very expensive government subsidy with almost little impact. It further addressed the worrying concern that the government’s youth employment initiative seems to be failing. In a recent interview on VOC’s Breakfast Beat show, Deputy Secretary General for Equal Education, Doron Isaacs said there is a huge problem with youth unemployment in South Africa with a large number not even finishing high school.
“Understandably the government is eager to address these issues. It’s intention is to encourage businesses to employ young people through implementing the unemployment incentive,” Isaacs explains.
“Any business which employs a young person below thirty years of age would receive a subsidy in the form of a tax deduction. In the first year the business receives R4000, and that drops slightly in the second year. But the concerns which we raised before this incentive came into effect, while applauding their intention, was that is this enough for businesses to hire more young people? or would businesses use this opportunity to collect the subsidy on young people already employed at their company and not continue to go on and employ more.”
According to Isaacs these same concerns have been confirmed by the research conducted at UCT.
“They cannot find in the data, of the first year of implementing the subsidy, any evidence that new jobs are being created for young people. Instead, the subsidy is being claimed for jobs that already exist. Money is being transferred from the government to businesses and no jobs are being created,” Isaacs added.
Meanwhile, Isaacs’ sentiments are that the future of youth employment in South Africa is hopeful. It is possible that things may change. We have also brought forward similar incentives from different developing countries to the South African treasury. In general, evidence for significant employment creation is very weak.
For example, researchers in 2004, analysed 159 different studies in a paper that they prepared for the world bank. They said the clear majority of subsidy programs does not appear to have net positive impacts on the long term employability. This is particular the case with developing and transition countries,” Isaacs said.
In conclusion, Isaacs told VOC that while the public should be encouraging government in its intentions to create better incentives for youth employment, this particular way of going about it, does not seem to be working. VOC (Ra’eesah Isaacs)