Gordhan impatient on youth wage subsidy

110509 Pravin Gordhan at the swearing ceremony of ministers in Pretoria.photo by Simphiwe Mbokazi

110509 Pravin Gordhan at the swearing ceremony of ministers in Pretoria.photo by Simphiwe Mbokazi

Published Feb 26, 2012

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Finance Minister Pravin Gordhan on Thursday expressed impatience with labour's stone-walling of his proposed youth wage subsidy.

“There are unresolved issues with respect to the youth wage subsidy,” he told a joint sitting of Parliament's standing committees of finance and appropriations a day after tabling his annual budget.

“Our challenge over the next six months is to very quickly build some consensus around what we could do so that we talk less about what we want to do and do what we want to do.”

The subsidy, in the form of a R5 billion tax credit over three years, was meant to be introduced on April 1, but Gordhan announced in his budget speech that for the moment it remained before the National Economic Development and Labour Council (Nedlac) for discussion.

In the committee, he confirmed that a major obstacle was the Congress of SA Trade Unions' fears that it would lead to employers getting rid of older workers.

“We have heard the views of the labour in this regard, that they have some design concerns.

“Amongst the primary concerns of some of the labour movement is the substitution effect Ä that businesses could employ younger inexperienced workers, get the subsidy and displace older workers.”

Gordhan said it was a genuine concern and his department undertook to address it in the way it designed the subsidy.

This had been under discussion at Nedlac for months, he added, and at the most recent meeting in early February, National Treasury urged members to resolve the issue.

“At that meeting we indicated that at some stage soon the talking must stop and we must decide whether we can reach agreement on a redesigned subsidy, or mechanism, or incentive which will ensure that the state incentivises employment within the private sector, but also in the social sector where that might be appropriate.”

Asked for comment, Cosatu spokesman Patrick Craven said the trade union federation remained resolutely opposed to the subsidy, and reiterated its concern that it would prompt employers “to retrench older workers”.

“We will discuss the problem of youth unemployment which we want to resolve, but we reject this youth wage subsidy which we feel is totally misguided,” he said.

Gordhan told MPs his ideal would be to reach agreement with labour “if we can”.

“We will make another attempt in the short term. We will take this back into the government system and we will get some guidance on what we do with it.”

He added: “We do want to repeat the message that the talking has to stop at some stage and the doing has to start at some stage.”

Democratic Alliance spokesman Tim Harris said he would use the Money Bills Amendment Act to table a proposal that the budget be changed to free up funding to implement the subsidy.

“We will propose in committee that the Pay as You Earn (PAYE) tax loss to fund the first year's subsidy (which should not exceed R1.6bn) should come from the R5.7 billion contingency reserve budgeted for this year.”

Harris suggested Gordhan would wait in vain for Cosatu's support.

“Our concern is that the minister may have been misled, because we have been reliably informed that Cosatu is flatly refusing to even discuss the subsidy at Nedlac.” - Sapa

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