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Seán Mfundza Muller, Senior Research Fellow at the University of Johannesburg, writes that the youth employment tax incentive, which came into effect in 2014, was supposed to help in addressing the problem that SA has one of the highest unemployment rates in the world.
The original incentive offered to reduce the tax bill of firms that employed new workers between the ages of 18 and 29 who earned below R6,000 per month. The policy was renewed in 2016 for another three years and, in 2018, it was extended for a further 10 years. The higher age limit was raised to 35. And it was made applicable to all new employees of firms operating in ‘special economic zones’ regardless of age. Muller notes that the adoption and implementation of the policy has been cited as a success story in two respects. Firstly, as a triumph of evidence in public policy formulation. Secondly, as an effective approach to reducing unemployment that should be expanded. But, Muller argues in a recently published paper that the first claim is false and the second claim is not supported by existing evidence. On top of this, the currently available evidence does not convincingly show any substantial effect on job creation. That means the incentive is effectively a subsidy to the profits of companies, so it is increasing societal inequality rather than reducing it. Muller concludes that if the real priority is addressing unemployment and the government is serious about being a successful developmental state, the policy should be ended and the resources directed elsewhere.
- Read the full original of the report in the above regard at Moneyweb
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