Johannesburg - The ANC's proposed job seekers' grant
has been met with far less enthusiasm than the abandoned youth
"The job seekers' grant will have
nowhere near the impact the youth wage subsidy would have had,"
said Adcorp labour market analyst Loane Sharp.
"The change from the unemployment
subsidy to a job seekers' grant involves such a totally different
economic method of working that it's not clear that the ANC has
identified the problem of unemployment correctly."
The African National Congress resolved
at its June policy conference to include a job-seekers grant as part
of the comprehensive social security package, in response to
submissions by the National Youth Development Agency and the ANC
The party has shown no appetite for the
youth wage subsidy put forward by National Treasury last year in an
attempt to alleviate the high youth unemployment rate.
Treasury estimates that unemployment
among those under the age of 25 years old is about 50%, accounting
for 30% of total unemployment.
The two-year subsidy for employers who
take on first-time workers could create 178,000 net new jobs at a
cost of R28000 each, Treasury said.
The subsidy was meant to be put into
effect in April this year, but had been stuck in negotiations at the
National Economic Development and Labour Council.
The ANC's alliance partner, the
Congress of Trade Unions, was strongly opposed to the subsidy,
arguing it would give companies an incentive to let go of existing
workers in order to employ subsidised ones.
Sharp said the grant would subsidise
the cost of recruitment, which was unnecessary as South Africa has a
very well-functioning informal industry recruitment system.
"Unemployment is a function of the
cost of employment, not the cost of recruitment... The subsidy will
not make job seekers any more desirable to job givers."
The youth wage subsidy, however, could
have created over 500,000 jobs.
"Our own estimates suggest that
National Treasury was very conservative in estimating the number of
new jobs that would be created," said Sharp.
"We believe employers are much
more sensitive to employment costs than the Treasury."
He said it was pity that the subsidy
had seemingly been abandoned as it would have shown the trade unions
that employment is "wage sensitive".
"It would demonstrate, almost in
an experimental way, just how sensitive employment is to wages...
which has been disputed in the trade union movement."
Black Business Council (BBC) spokesman
Sandile Zungu also saw immediate benefits to the youth wage subsidy,
while the advantages of the grant were not clear.
"As the Black Business Council...
we are waiting for details of how they envisage doing it."
The BBC was in favour of the youth wage
subsidy as it "had an inherent motivation for business to come
to the party and an immediate benefit to young people getting some
experience whilst not necessarily in full employment".
Zungu said the proposed grant raised
-Is it going to encourage business to
-Will it create an incentive for the
unemployed to pull up their bootstraps and continue to look for work?
-Will it strengthen or weaken the
state's coffers in the long-term?
-Who is going to pay for it given that
the South African tax base is limited?
Zungu suggested labour's valid concerns
about the subsidy leading to job losses among older workers should
have been addressed, rather than abandoning the scheme altogether.
"Instead they threw out the baby
with the bath water. We did a face exchange instead of treating the
warts and pimples."
Rather than creating jobs, the job
seekers' subsidy might just teach the youth to queue.
"The youth must wake up at 4am and
go to work, not wake up to go and queue," Zungu said.
Sharp and Zungu both questioned the
sustainability of the grant.
Sharp said according to Adcorp figures,
the average time spent searching for work is 806 days, while South
Africa has around 6.5 million unemployed or discouraged work seekers.
Multiplying 6.5 million by 806 days,
amounts to just over 5.2 billion days for which work seekers would
need to be subsidised, making the grant "fiscally impossible".
Treasury had set aside R5bn over three
years for the subsidy. The job seekers' grant had not yet been
Herman Mashaba, chairman of the Free
Market Foundation, took a different view.
"I don't really believe that
giving grants is going to arrest our high employment, given our
restrictive labour legislation," he said, referring to both the
youth employment subsidy and the job seekers' grant.
"You can't, on the one hand, treat
employers as enemies of the people then, on the other hand, expect
them to give jobs."
He said if government was serious about
arresting high unemployment, it should introduce less restrictive
"If you bring in a subsidy to
encourage entrepreneurship and to encourage economic activity it
could work, but not with our current punitive labour legislation."
Economist Mike Schussler said given the
high unemployment, the country could not be seen to do nothing.
Broad employment figures for the first
quarter of the year showed about 7.3 million people were employed
full-time in the formal sector, while about 7.75 million people,
including discouraged work seekers, are unemployed.
"I don't know of any countries,
outside of war zones or those involved in civil war, to have more
people unemployed in broader terms... than employed," Schussler
The unemployed therefore make up double
the number of the some four million workers belonging to trade
unions, he said.
"So for the politicians, they have
to be seen to do something."
However, he did not see the job
seekers' grant solving the country's unemployment problem.
"The youth employment subsidy may
at least create some jobs... but nobody knows at the moment what this
thing (grant) is."
Schussler said it would probably make
more of a difference to fix the education system, re-examine the
labour laws, give farmers confidence in their tenure, and encourage
miners to mine, among others.
Zungu warned it was too soon to judge
the job seekers' subsidy.
"We may be jumping the gun, they
may have a genie in the bag which, once put on the table, we may
engage and say, what a smart way out of the quagmire."
The proposal will be fleshed out at the
ANC's national conference in Mangaung in December.
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