Fact, fiction, subsidies & jobless youth

Posted on May 20, 2012


Facts, fictions and often emotional assumptions pepper the current intense debate in South Africa about a youth wage subsidy. But there is one fact about which all parties agree: there is a massive problem of youth unemployment. Millions of young men and women between the ages of 18 and 25 simply do not have jobs; they are, for the most part unproductive, poor, frustrated and angry.

They also happen to constitute a potentially crucial voting bloc in any future election. And this is why the debate around the wage subsidy issue has become as intense as it has. These are the children of the new South Africa, men and women who never knew apartheid and who grew up under an ANC government that, as many see it, promised much and delivered little.

But there has been delivery. There are now more RDP houses and more electricity and water connections that have to be paid for. This requires income. And income requires jobs. So any political party that holds out the prospect of creating jobs could win the votes of a substantial part of the estimated 7million unemployed youth.

This is the background to the youth wage subsidy and the rows and clashes that have followed. Last year finance minister Pravin Gordhan proposed a R5 billion fund to subsidise youth wages with the intention of making major inroads into youth unemployment. The opposition Democratic Alliance concurred and business agreed. The unions, however, were less than happy and opposed the scheme.

However, the proposal went, in May last year, to the National Economic Development and Labour Council (Nedlac) the forum at which representatives from business, government and labour debate government policy proposals and, hopefully, produce a consensus that can be put into practice. No consensus was possible and the debate has now erupted into the open.

Among the fictions broadcast is the claim that Cosatu opposes the subsidy because it wishes to protect established, higher paid workers at the expense of the youth. Yet these young people are often the offspring of unionised workers in permanent jobs. But Cosatu — and the labour movement as a whole — supports the idea of the greatest possible job creation. Their argument is that, at the very least, the government’s proposals amounts to merely “throwing money” at a problem that requires much more careful thought and action.

The more cynical among the unionists also see the proposal by government as a simple election ploy to win the crucial youth vote. Much the same, they maintain, applies to the DA and its vociferous support for the subsidy.

But there are trade unionists too who allege that the DA is a “fascist” organisation bent on crushing the unions in the cause of “international imperialism”. Yet, by no stretch of the imagination can the DA be categorised as facist and while the party certainly supports the concept of free enterprise businesss, there is no evidence that it is involved in any international conspiracy, even if one exists.

The DA also claims that youth wage subsidies around the world have shown that they create jobs and open up opportunities for young people. This claim, in turn, is rejected out of hand by the labour movement.

Yet there is truth in both of the claims. An Australian wage subsidy scheme was shown, in 1998, to have had mainly positive outcomes while youth unemployment in Singapore was probably halved between 2003 and 2007 when a wage subsidy scheme was in operation. Both these cases are currently being quoted by the DA.

However, both refer to a time before the global economic crisis fully struck home. They also apply in countries where the level of education, across the board, is much superior to the average in South Africa. The problem here is that many, if not most, of the unemployed youth are not only unskilled, they are also ill-educated, with the result that many have been described as “unemployable”.

So what South Africa needs, if there is to be any real reduction in youth joblessness, is structured technical education, perhaps in the form of apprenticeships that can produce competent artisans in trades where this shortage of skills exists. Once again, this may also amount only to a relatively small number of jobs, unless other steps are taken to alter the present economic environment. Because, courtesy of the micro chip revolution and the automation it has spawned, less labour is required to produce the goods we all need within the existing system.

One result of this is that, according to International Labour Organisation estimates, there is now a record number of 210 million unemployed workers globally. A simple wage subsidy will do nothing to dent this. Nor will a subsidy alter the fact that profitable businesses are not in the business of job creation. Additional jobs will only be created when they are needed.

When all these factors are taken into account, the rejection out of hand of any form of subsidy is as simplistic as the wholehearted acceptance that a youth wage subsidy will provide anything more than a temporary plaster over a gaping social wound.

Posted in: Commentary