• Change of culture needed

    The right leadership will help SA shed its culture of violence, says Mandi Smallhorne.

  • 10 tips to find bargains

    Susan Erasmus gives advice on how bargain hunters can get the most bang for their buck.

  • Inside Labour

    Labour's bitter breaches need to be seen in historical context, says Terry Bell.

See More

Wage subsidies may boost hiring

Feb 13 2011 12:06 Mari Beukes

Related Articles

Cosatu hails youth subsidy omission

Zuma may launch wage subsidy for youth

Housing subsidies top 2.4m

Subsidies 'a curse' to poor

Geyser subsidies may double

Taxi operators demand subsidies

Johannesburg - Wage subsidies, referred to by President Jacob Zuma in his 2010 State of the Nation address, have helped countries like Italy, Poland and the Czech Republic to reduce unemployment by up to 15%.

Subsidy programmes that target special groups of workers – like young people or women – have apparently been more successful. In Ireland and the Czech Republic hiring was up between 12% and 15.6%.

Italy’s programme had two important features which, according to economists, characterise an effective wage-subsidy programme. Apart from being targeted at specific groups, they ensured that administrative costs did not dissuade companies from participating.

Italy introduced its wage subsidies in the 1980s to prevent joblessness among young people. Italian researchers found that these subsidies, which lasted for longer than a decade, had an enduring positive effect on the employment of young people.

Despite expectations, in last week's State of the Nation address Zuma said nothing about similar wage subsidies for South Africa’s young people.

Until the national budget is announced on February 23, observers can only speculate how the R9bn that government will set aside for job creation over the next three years will be spent, said Sandra Burmeister, chief executive of the Landelahni recruitment agency.

Sake24 understands that a programme such as this will in fact be announced during the budget.

Programmes in Australia, Belgium, Ireland and the Netherlands have shown these types of dead-weight losses.
For every 100 subsidised jobs that programmes added, only 10 new jobs were added to the economy, as shown by information from the Labour Policy Committee of the European Union.

A successful wage-subsidy programme would also ensure that the subsidy covered the true cost of appointing and training a new worker.

According to Burmeister this cost is often much more than an employee's mere salary.

Providing in-service training, he said, could be a big burden for companies. Young workers might learn the theory at school or in their university training, but that did not mean that they had the necessary skills to perform a specific function in a company.

The Southern Africa Labour and Development Research Unit (Saldru) attached to the University of Cape Town said that one of the problems with apprenticeships in South Africa was the administrative burden accompanying them.

Subsidy programmes in the US during the 1970s were also unsuccessful because subsidies were too small for companies to derive real benefit from them.

Subsidies that offer attractive incentives could cost governments a great deal, said Saldru.

- Sake24

For business news in Afrikaans, go to Sake24.com.

jacob zuma  |  budget  |  wages  |  state of the nation  |  jobs


Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

Brought to you by BizNews

More from BizNews

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

Top 10 richest musicians of all time

Check out the gallery to find out who they are!


Luxury living

10 of the most expensive things that will leave your jaw hanging!
Seven of the most expensive children's toys ever made
5 millionaires turned murderers
The youngest billionaires in the world and how they made it

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

How do you see your boss? He/sheis:

Previous results · Suggest a vote