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THERE is agreement – from the president and his cabinet, analysts and politicians to labour federation Cosatu – that youth unemployment is SA’s ticking time bomb of discontent. But there’s no agreement on what to do about it.
This week’s bloody street battles over the youth wage subsidy in Braamfontein, Joburg, represent a clash of power blocs within the tripartite alliance and the opportunistic mission of the DA to broaden its appeal among black voters.
Amid the bricks and blood, corporate SA remained silent. The business sector sits on a reported R520 billion in its bank accounts, rather than investing this money in the domestic economy, skills or employment creation.
And instead of leading the public debate on what is, in fact, its own policy, the government has conceded ground to labour and the opposition. In a recent parliamentary reply President Jacob Zuma insisted the youth wage subsidy would be implemented – once discussions at the National Economic Development and Labour Council (Nedlac) had been finalised and drafted into a final policy proposal for cabinet.
But Nedlac, which brings together labour, the government, business and civil society, has been sitting on the subsidy proposals for a year. The pilot project’s proposed starting date of April 1 has gone by, and discussions continue.
Announced in the president’s 2010 State of the Nation address, the subsidy was allocated R5bn in Finance Minister Pravin Gordhan’s 2011 Budget speech, when he also gave more details of the plan.
It would be a tax credit scheme granted for a maximum of two years, available for those aged between 18 and 29, earning below the income tax level of R60 000 a year.
While the National Treasury estimated 423 000 jobs could be created, it has conceded that tens of thousands of these jobs would open up anyway. The number of jobs created directly through the subsidy would be closer to 178 000, each at a cost of between R28 000 and R37 000.
Cosatu, at Nedlac and elsewhere, has argued the subsidy would lead to the displacement of older workers as businesses keen to save money would take on the subsidised younger workers in their place. Rather than a silver bullet solution, it has called for a fundamental policy shift involving a return to basics to open up the economy through, for example, the infrastructure and community work programmes and the development of industrial zones.
It also urges improvements in the education system, which churns out about 400 000 matriculants annually, with no prospect of further education or employment.
While the two-million-strong labour federation seems to have the government dancing to its tune, its argument is not only protecting its members’ interests, but also those of taxpayers, who would have to fork out for the subsidy for jobs which may have been created anyway.
This comes hot on the heels of Cosatu’s successful campaign to halt the Gauteng e-tolls, which the ANC agreed to put on hold for a month, before a court ruling put a stop to the project anyway.
The cabinet announced on Thursday it would appeal against the interim interdict granted by the North Gauteng High Court pending a court review of the system.
While Cosatu continues to battle for a ban on labour brokers – another policy it says the government has adopted an opposition approach on – it made a significant breakthrough in getting the government to drop several controversial labour law amendments which would have curtailed the right to strike and protest. In so doing, it has shown the government that it is out of step with popular sentiment.
Cosatu has pushed pro-worker and pro-poor policies, but has clashed with the government over economic policies.
This week, Cosatu boss Zwelinzima Vavi called for a return to basics on the policy front, warning the government it was scoring own goals which gave the DA the opportunity to capitalise.
Cosatu spokesman Patrick Craven dismissed concerns the labour federation was acting like a shadow government.
“It’s persuasion. We are trying to convince our alliance partners… We are not elected, but we are a democratic structure. When we speak, we speak for a constituency which in fact is bigger than two million (members), as each member has family members.”
Shortly after Tuesday’s street battles, which spawned front-page pictures of bloodied DA supporters, the party moved to make political hay. On Thursday it announced its plans for mass mobilisation to ensure the subsidy would be implemented. Earlier, DA leader Helen Zille said the youth wage subsidy, a version of which is being implemented by the Western Cape government she heads, was working to get young people into jobs.
The party’s special website, www.youthwagesubsidynow.org, which was launched late last year, makes the point that more than 300 000 young people could have had jobs by now if the subsidy had been implemented.
DA finance spokesman Tim Harris described the subsidy as a “smart” state intervention in the labour market, saying more than 11 000 jobs could be created every month.However, previous government initiatives to boost employment and training through tax and subsidy incentives have had mixed results. For example, the Sectoral Education and Training Authorities (Setas) have been heavily criticised for, among others, sitting on R38bn in bank accounts, while they spent R34bn on training initiatives.
Economist Mike Schussler says the youth wage subsidy is worth a try. It has worked, to different degrees, in other countries. “To make this a political thing is wrong … At the end of the day, should we not try something different?” he asked, adding that almost as many people were unemployed as were in jobs.
Another economist, Dawie Roodt said Cosatu and the DA got it both wrong and right. Cosatu was right in pointing out young workers would replace experienced ones; the DA had it right that the youth wage subsidy would enable youngsters to get experience, thus overcoming a significant obstacle to employment.
But a youth wage subsidy would not fundamentally address SA’s economic challenges, Roodt said.
His suggestion: reduce minimum wages and ease labour regulations so that wages find a lower average, which would be cheaper for the taxpayer than a youth wage subsidy.
Cosatu has fought tooth and nail against a relaxation of the labour laws, arguing workers would be further disadvantaged. It cites statistics to back this up. According to the UN Development Programme, 44 percent of workers live on less than R10 a day and, according to Statistics SA, about 60 percent of workers earn R3 000 or less a month.
“On average, an African man earns in the region of R2 400 a month, while on average a white man earns around R19 000 a month,” Cosatu said in its counter-memorandum to the official opposition this week.
“But the DA will not march against this pathetic situation… The youth wage subsidy will worsen this situation by getting young workers to earn below the already pathetic levels.”
The DA has identified Cosatu as the obstacle to dealing with youth unemployment to score political points. However, since it is the government that makes and implements policies – it is not obliged to await the finalisation of Nedlac discussions – a march to the Union Buildings would have been more appropriate.
The youth wage subsidy goes to the heart of how the government, business, labour, civil society and politicians of all persuasions see themselves contributing to transform one of the world’s most unequal societies. But it has been turned into a political football.
The losers? The three million young people aged 18 to 34, or almost three out of every four, who remain unemployed.