Is the youth wage subsidy good for the economy?

2012-02-29 06:37

It is no secret to South Africans that a youth unemployment crisis chokes the very capillaries of our economy.

Youth (ages 15-34) unemployment makes up 70.8 % of all unemployment as the latest figure from Statistics South Africa's Quarterly Labour Force Survey indicates. A large percentage of the unemployed, 49%, have not finished secondary school.

The government’s solution to this puzzle has been the proposed R5 Billion youth wage subsidy.

This subsidy is meant to act as an incentive for companies to buffer the costs and risks associated with employing young people. This programme was projected to start on the first of April 2012, for a period of three years. Is this an adequate programme to serve young people as 37% of the population, and the economy at large, or is it mere tinkering at the edges of a larger problem?

A slice of the problem lies in the fact that the unemployment experienced is a by-product of the asymmetries between jobs provided and skills possessed by the unemployed. At the core of this is an education system, which does not allow all young people access to the best teachers, a high quality syllabus and the commensurate facilities.

Only after this is well established can South Africa assess the genetics of the economy it is meant to be. Only then can South Africa understand where its strengths lie.

The problem with the current education system is that is does not give young people the opportunity to understand and exploit their talents. These talents remain hidden in a cobweb spun through an ineffective education system.

The economy cannot be willed to produce a comparative advantage before knowing what its natural comparative advantage is. South Africa needs to understand the makeup of its society, it needs to uncover the hidden niches of excellence and use these first.

Sure, every country needs employment opportunities in all sectors but the bedrock of the economy must lay in a foundation of excellence created by a certain niche. Just as India is becoming a services giant, China a manufacturing hub, must we establish an appropriate launching pad of excellence. Only by uncovering this bedrock of excellence can we then be duly mentioned in the same breath as Brazil and China.

The point here is to not create a specific type of employee or economic player but to understand what we are good at and use this for the betterment of our economy. This may require a shift in the fundamentals of our economy but only through this can young people be given a fair chance.

Until these roadblocks are attended to there will be no improvement in the plight of young people. The youth subsidy scheme does not address the fundamental problems. The projection that 400 000 jobs will be created by this subsidy does not answer the question for the rest of the unemployed youths.

What will then happen to the others? We need to understand what we are good at and establish a niche. Only then can we craft a commensurate economy of global significance.

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