Pretoria - Finance Minister Pravin Gordhan gave more detail about a proposed subsidy for youth employment mentioned in President Jacob Zuma's state of the nation address last week, as well as other measures to encourage youth employment in the National Budget on Wednesday.
Gordhan said under the leadership of the department of labour, initiatives were in progress to improve information services to help young people access jobs and training opportunities.
"We propose to support these reforms through a subsidy to employers that will lower the cost of hiring young people without work experience," he said.
"Under consideration is a cash reimbursement to employers for a two-year period, operating through the Sars [South African Revenue Service] payroll tax platform, and subject to minimum labour standards.
"It will be available to tax-compliant businesses, non-governmental organisations and municipalities. Our preliminary estimate is that about 800 000 people will qualify. The aim is to raise employment of young school-leavers by a further 500 000 by 2013," he said in his speech.
The Budget Review said youth unemployment was extremely high. More than three million young people did not work, translating into a youth unemployment rate of nearly 35%. Young people tended to stay unemployed for a long time before finding a job.
"Such long periods of joblessness can produce permanent scars, for being unable to find a job at a young age raises the probability of being unemployed later in life and involves a wage penalty. The case for intervening in the youth labour market is strong," the review said.
It said measures could include regulatory reform covering the probationary period to reduce the costs associated with determining a young workers' productive potential; assessing existing measures, such as learnership allowances, so that they provided incentives to hire younger workers; and minimum wage reform to align productivity and wages for young workers. Argentina, Chile, the Czech Republic and Turkey, for example, had lower minimum wages for youth.
"Lowering the cost of hiring young workers and regulatory reform during the probationary period will provide additional incentives for firms to formalise reducing the extent of unregulated labour and bringing more young workers into the formal economy," the review said.
It said youth employment would also benefit disproportionately from sustained and accelerated economic growth, because young people tended to be absorbed more readily into the labour market in a growing economy.
- Fin24.com