Johannesburg - A study by the University of Cape Town’s Southern Africa Labour and Development Research Unit has cast doubt on the effectiveness of the government’s youth wage subsidy in the first two quarters after its inception on January 1 last year.
It found no evidence that the introduction of the employment tax incentive had any impact on the rate at which young people found jobs.
“In the first six months (after) the introduction of the (employment tax incentive), we find no evidence that it has had any substantial, positive and statistically significant effect on aggregate youth employment probabilities,” the unit says in its report.
“At best, the effects of the employment tax incentive are small. We also find no evidence that the rate at which youth find or lose jobs has changed.”
The subsidy has been hailed as one of the catalysts in the government’s efforts to reduce youth unemployment.
Even the National Youth Development Agency (NYDA) has had reservations about its potential.
Treasury figures show companies have claimed about R2.8 billion of the R5bn allocated to the scheme, with about 270 000 young people having benefited. At face value, it appears results have exceeded the 178 000 jobs envisaged the initiative would provide in the first two years.
An earlier study, and Treasury figures, suggest otherwise, however.
Some of the problems related to the incentive appear to be less about the money allocated to it and more about the way it is structured.
Only firms that are registered for PAYE and which are tax-compliant are eligible to claim.
By its nature, the incentive excludes thousands of employers in the informal sector and favours large firms which are already employing young people.
The UCT study found that most of the companies that hired young people in this period would have hired them anyway.
Also, the lack of skills and experience among young people remained a strong deterrent for firms to hire them.
The researchers noted that the scale of the programme was “quite modest” in relation to the number of unemployed youth.
Therefore, even if the employment tax incentive were to achieve its stated objective of creating 178 000 net new jobs, youth unemployment levels would remain exceptionally high.
The NYDA’s chairman, Yershen Pillay, is among those who say the tax incentive would be more beneficial if it were skills-based, or if the money was dedicated to skills and development programmes.
The Treasury said this week it would evaluate the scheme before it ended on December 31.”
The Sunday Independent