State tables youth-jobs plan as Cosatu hollers

2013-09-22 14:00

Labour federation president digs heels in as Treasury tables draft bill.

Labour federation Cosatu says it will oppose the “youth wage subsidy” that’s been tabled before Parliament as Treasury’s Draft Employment Tax Incentive Bill.

Cosatu president Sdumo Dlamini says the bill “looks like a youth wage subsidy”, despite its name.

On Friday afternoon, Treasury tabled the draft bill, which contains a number of new safeguards against potential abuses of the subsidy, but still amounts to a devastating implicit criticism of what Cosatu holds dearest: minimum wages.

The draft suggests government really does believe minimum entry-level wages in South Africa are too high and have to be expensively counteracted to create jobs.

The maximum subsidy of R1?000 per month will apply to workers earning between R2?000 and R4?000 a month, says Treasury.

The plan is also to incentivise hiring people on wages lower than R2?000, where these are legal.

This comes straight after Cosatu resolved on Thursday that a national minimum wage of R4?800 or higher must be part of the ANC’s election manifesto next year – something the ANC clearly doesn’t take seriously.

Just three weeks ago at the tripartite alliance’s summit in George, Dlamini confidently called the subsidy a “policy proposal that has been defeated in our own internal processes as the alliance”.

The political fallout for the ANC may be tempered by the roll-out of a state-funded job-creation strategy in time for elections.

The subsidy is perceived as popular and in a survey of Cosatu shop stewards conducted last year, 42% said they supported the idea.

It also deprives the DA of a major part of its planned economic election platform – a promise to introduce the subsidy wherever it wins elections.

The DA on Friday “noted” the draft bill, but its shadow minister of finance, Tim Harris, still complained that it would “exclude benefits for many young people hired in entry-level and part-time jobs in sectors without minimum wages”.

The subsidy will also introduce a new dynamic to wage bargaining, as government will in future be footing part of the private sector’s wage bill.

Treasury proposes that the subsidy come into effect on January 1 2014 and lasts until the end of 2016.

New workers appointed after October 1 this year will qualify.

There are a lot of changes to the original proposal from 2010 – most of them meant to address Cosatu’s concerns.

While the original plan was estimated to cost the SA Revenue Service R5?billion over three years, there are no new estimates for the altered scheme.

It will no longer give a smaller subsidy to existing workers under 24.

At the same time, the subsidy will now be made available for workers of all ages in the country’s newly established special economic zones, potentially making it far larger than the original proposal.

Treasury is promising to thoroughly review the subsidy after two years and is leaving the door open to ban specific sectors’ employers from using the subsidy.

Dlamini said Cosatu wanted a youth employment subsidy scheme that emphasised skills development and avoided the exploitation of young workers by employers.

Wage-subsidy rules:

»?All 19- to 29-year-olds who earn less than R6?000 per month qualify, as do workers in the special economic zones

»?The monthly subsidy of between R1 and R1?000 will be paid to employers through the pay as you earn (PAYE) employee tax system

»?It lasts two years per worker, at half the initial rate in year two

»?No domestic workers qualify

»?No workers “related” to the employer qualify (to stop fraud)

»?No government departments may use the subsidy

»?No state-owned entities may use the subsidy without explicit approval

»?No subsidies will be paid to employers who owe any taxes, ie VAT

»?Subsidised jobs must pay the minimum wage of applicable sector or R2?000 per month

»?There will be fines of 150% of the subsidy if older workers are displaced through unfair dismissal

»?Companies with only low-wage employees can’t get the subsidy because they are not registered for PAYE employee tax (they will be included in a later phase)

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