Budget: Youth fund injection

2011-02-23 12:14

Labour federation Cosatu’s outcry to have the government do away with its plan to allocate funds aimed at encouraging the private sector to employ the youth, appears to have gone unnoticed, as Finance Minister Pravin Gordhan allocated money to the fund.

In his Budget Speech, Gordhan announced that a staggering R5 billion will be channelled towards the Youth Employment Subsidy.

The incentive scheme comes two weeks after the Labour Force Survey for the third quarter last year showed that 42% of people aged between 18 and 30 were unemployed.

“Only 12.5% of South African youth aged below 25 had a job compared to 40% in most emerging economies.

In short, getting that first job after leaving school is the biggest hurdle for young people,” said Gordhan.

“But once one has had that first formal job, chances of getting another are improved.

“Young unemployed people who have some work experience are at least three times more likely to find a job than those who have never worked,” he said.

The subsidy, which Gordhan had promised to launch last March, has been a bone of contention between the ANC’s key alliance partner Cosatu and government.

Cosatu has been contending that the subsidy would encourage companies to concentrate on hiring youth to the detriment of the older workers.

“To take advantage of the subsidy, workers must be aged between 18 and 29 and their wages must be below the personal income tax threshold, which is being raised to R59 750 from R57 000,” said Gordhan.

The subsidy is aimed at covering 423 000 young workers and is projected to create 178 000 new net jobs, each costing R28 000.

“The upper age (29) threshold was chosen because unemployment rates are higher at this age level,” he said.

Gordhan added that the current subsidy will run for three years and will be monitored and reported on every quarter.

“The decision to continue with the subsidy or whether to change its design will depend on the success of the current subsidy to achieve employment targets as well as the costs thereof,” said Gordhan.

The subsidy will be administered by SA Revenue Service.

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