The debate on youth subsidy has gathered pace. The arguments for a youth subsidy consist of two major arguments.
First, the high rates of unemployment amongst youth are exceedingly worrying. As shown in a previous chart on Zapreneur. The key features of the unemployment data by age, show that:
The key features of the data include that:
- The biggest proportion of unemployed are concentrated in the age groups 15-24 years (29.5%) and 25-34 years (42.8%).
- Unemployment for those 34 years old and younger accounts for 72,3% of unemployed South Africans.
Youth unemployment thus is a serious challenge, and perhaps the defining challenge that we face.
Second, that the youth subsidy address the core issue of high wages, thus ensuring that young people will be employed. It is on this point that the majority of the debate has focused. Those is support of the youth subsidy argue that through providing employers with a way to reduce the risk of employing young people. A recent and rare press statement by Business Leadership South Africa makes the following point:
BLSA strongly endorsed Treasury’s youth wage subsidy proposals, currently before NEDLAC, and committed members to participating in the scheme. Providing opportunities for young unemployed South Africans required innovation and risk taking and BLSA commended government for this important initiative. BLSA is confident that subsidy proposals would not be abused by members to replace or displace existing workers with young workers merely to gain from the subsidy.
Those arguing against the youth subsidy proposals, argue that it will result in a dual labour market, and ultimately a “race-to-the-bottom”. Here is Cosatu, in coalition with churches and non-government organisations, under the People’s Budget Coalition, on the youth subsidy proposals:
The People’s Budget Coalition (PBC) will be seeking further clarity on the proposed subsidy to employers that will lower the cost of hiring young people without work experience. While we note that such employees will be “subject to minimum labour standards”, we are still concerned that this scheme could lead to a two-tier labour market. Our suspicions arise from the fact that the “employment” chapter of the budget review talks about introducing a separate lower minimum wage for the youth, citing Chile,Czech Republic, Turkey etc as examples.
The eventual basket of minimum standards that the budget review talks about is not what we currently have. There are also references to introducing “regulatory reform and employment incentives to make the cost of labour more competitive” in labour intensive industrial and export zones, which would apply to all workers.
The debate misses an important feature on the educational profile of the unemployed. The Quarterly Labour Force Survey (2nd Quarter, 2011) provides data on education and the unemployment rate. The data as shown in the chart below raises significant questions.
The data shows that there is a relationship between educational attainment and unemployment is important enough to enter the debate, as the majority of unemployed (over 90%) have a matric or less. This is not to imply that there is a stronger correlation between education and unemployment, as compared to wages. Rather it is to indicate that good policy choices can only be made once the relative importance of wages, education and other factors impacting on youth unemployment are carefully assessed.
This should be undertaken with urgency, if the impasse on deliberate action on youth unemployment is to be assessed.