The proposed Youth Wage subsidy was a step in the right direction in reducing unemployment, but more attention must be paid to issues of skills development and hard job creation.

This was the consensus of associated experts and academics at a panel on Youth Wages and Employment Subsidies.

Under discussion was whether the subsidy could generate the type of youth employment needed by the country.

In its simplified form, the subsidy would target 90% of the youth between the ages of 15 and 24, and lead to the creation of 178,000 new jobs.

The subsidy has been disparaged by Economic Development Minister Ebrahim Patel who believes that it would not only result in insignificant job creation, but displace older workers from the workplace. The ANC has also rejected the subsidy and is advocating for compulsory national service and the implementation of a job seeker’s grant.

Dr Neil Rankin, of the African Micro-Economic Research Unit at the University of the Witwatersrand, who is currently conducting a study into wage-subsidies, said the problem was not labour costs, but worker qualifications.

“Firms worry about the uncertainty that surrounds people’s productivity and their skill. That is a big issue for potential employers.”

David Faulkner, Chief Director of the National Treasury’s Macro-Economic Department stressed the importance of developing skills as a long-term solution.

“[In South Africa] qualifications are not good indicators of quality,” he said. Most attendees were not supportive of the ANC’s job-seeking grant proposal.

“I don’t think they’ve thought it through,” said Rankin. “Would it be used to seek a job, or is it to transfer wealth to the youth? I don’t think the Job Seekers’ grant will result in the outcome they want”.

The Head of the Jobs Fund at the Treasury, Najwah Allie-Edries, said the grant could “never be an alternative” to the subsidy. “It’s political,” she said.

Allie-Edries said a multi-pronged and experimental approach was required. “We must be allowed to experiment, to see what works and to implement it. We believe in an experiment-based approach.”
She proposed a database of work-seekers that profiles individuals throughout their years of education, while potential employers log available jobs. The government should work with firms to utilise the strong private sector infrastructure to create a “seamless” system, she said.

All agreed that, whatever the solution, it needs to conform to unique South African context and challenges.

By Berndt Hannweg