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Budget 2011

Youth wage subsidy to start next year – Gordhan

Thu, 24 Feb 2011 07:47

The National Treasury wants to implement a R5 billion youth employment subsidy in the 2012 financial year – from 1 April 2012.

In a media briefing before his Budget Speech, the Minister of Finance Pravin Gordhan said the proposal would be taken to the National Economic Development and Labour Council (Nedlac) on Friday.

Details of the youth employment subsidy are set out in a discussion paper, for further consideration by Parliament and Nedlac.

The subsidy compensates employers for taking on young employees and can act to offset the costs of training or risk incurred by employers – especially those running small enterprises.

The National Treasury believes that the subsidy will also encourage youth, who believe they may more easily find work, to search for jobs more actively.

The idea is that the subsidy will run through the Pay As You Earn (PAYE) tax system operated by the South African Revenue Service (Sars).

To qualify, workers must be aged between 18 and 29 and their wages must fall below the personal income tax threshold – which for the coming tax year (2011) is set at R59 750.

The subsidy is expected to cover 423 000 young workers and given that some of these workers are likely to be hired anyway, the number of new jobs is estimated at 178 000 – at a cost of R28 000.

The plan is that as Sars already uses its PAYE system to reconcile the records on employees and employers twice a year, the system will allow for Sars to corroborate information on employers and employees claiming the subsidy.

Gordhan said about R150 billion, over the next three years, had been set aside by government to help create more jobs.

Gordhan said unemployment is a serious problem in South Africa, with 41 percent or only two out of five people of working age in South Africa have a job.

In emerging nations the rate is far higher – more than three and five people (65 percent) of working age in Brazil have a job, 71 percent in China and 55 percent in India.

To reach the global average labour participation rate of 56 percent, South Africa would need to employ 18 million people – five million more than today.

Most pressing is the unemployment among those working age youth below 25 years of age – where about 50 percent are unemployed.

The global financial crisis affected South Africa particularly badly according to the Organisation of Economic Co-operation and Development (OECD0, with employment contracting by 7.5 percent in the recession, compared to a decline of 0.6 percent in Korea, 5.4 percent in the US and 2 percent in Chile and 13.6 percent in Ireland.

– BuaNews