We need a real Youth Wage Subsidy to create jobs in SA

18 January 2015

The DA welcomes the University of Cape Town report into the effect of the Employment Tax Incentive (ETI) - government's watered down version of what should have been a Youth Wage Subsidy.

The report supports the DA's position that COSATU's bullying of government into a weaker tax incentive for employing youth, rather than a strong Youth Wage Subsidy, will not have the same impact on creating jobs for young people that South Africa desperately needs.

The DA supported the adoption of the ETI in 2013 with reservations, noting that the final version had been significantly watered down from the initial proposal. 

Moreover, the delay in tabling the Bill in Parliament, caused by the stand-off between the ANC and COSATU, led to 218,000 young job seekers joining the ranks of the unemployed.

The UCT report has since found that during the first six months of the implementation of the ETI, it had no significant impact on youth unemployment rates or job creation.

This is supported by the Third Quarterly Labour Force Survey 2014, which found that young people aged 15-34 years remain disproportionately represented among the long-term unemployed. 

The total number of unemployed and economically inactive youth actually increased from 2013 to 2014 by 306,000 people. 

The bottom line is that overall unemployment remains at over 35%, with the youth making up 67.5% of this number. 

Treasury was also unable to confirm earlier this week how many new youth jobs had actually been created by the ETI, citing only that that subsidies had been claimed on 270,000 individuals during the first 12 months of its implementation. Their projections of 178,000 new youth jobs to be created over 3 years is also not enough to impact on rising youth unemployment.

A key problem with the ETI that both the DA and the UCT report have outlined is that the ETI is a tax incentive and not a wage subsidy. 

This limits its impact on informal sector firms and smaller firms that are not registered for PAYE.

The meagre budget of R5 billion for the entire programme means that the value of the incentive may be too low to encourage firms to create new jobs.

The DA will continue to fight for a real Youth Wage Subsidy, as opposed to a watered down tax incentive scheme. We believe this needs to be firmly on Parliament's agenda this year.

Our youth remain excluded from the economy with the ETI not doing enough to change this.

In the context of the electricity crisis that has cost the economy an estimated R300 billion per year and a million jobs, it is clear that we need stronger legislation to bring about significant changes in employment patterns and job creation.

We remain committed to real job creation and believe that the Youth Wage Subsidy must be an integral part of government's plans.

Statement issued by Mmusi Maimane MP, DA Parliamentary Leader, January 18 2015

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