Parliament to decide on youth subsidy bill

22nd October 2013

By: Sapa

  

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The so-called youth wage subsidy bill does not need Nedlac approval, National Treasury officials told Parliament's finance standing committee on Tuesday.

"Parliament is the only supreme body here and it approves or rejects or amends bills," Treasury deputy director general Ismail Momoniat said.

Treasury was reporting back on last week's submissions by, among others, trade unions, businesses, and churches.

Both the Federation of Unions of South Africa and the Congress of South African Trade Unions rejected the draft Employment Tax Incentive Bill, saying there was a lack of consultation over the bill at the National Economic Development and Labour Council (Nedlac).

Momoniat said legally government did not even have to table the bill at Nedlac.

"It's a money bill... therefore we were not compelled to take it to Nedlac but we have taken the idea to Nedlac.

"The consultation process may not be perfect but it has been done and you don't always reach consensus, but it doesn't mean government is not allowed to come up with a proposal and put it to Parliament," he said.

On concerns by unions that employers would abuse the bill by replacing workers with subsidised employees, Momoniat said significant penalties were in place to prevent this.

"The bill affects those who are not currently employed... so perhaps that if it does have some sort of economic impact it will not be on labour, it will be those outside of labour who will join the labour force," he said.

Momoniat suggested the incentive scheme could benefit trade unions by boosting their membership numbers.

While many of those taking part in the public participation process had rejected the subsidy in principle, they had done little to offer as alternatives.

Treasury officials conceded the incentive scheme was experimental.

"We are not saying this is a panacea, but this is one of many measures government uses to deal with the problem of youth unemployment," Momoniat said.

Some of the concerns of the bill's opponents were accepted and would be included in the revised draft of the bill to be presented on Wednesday.

"We've tried to listen carefully, so we took to heart a lot of the issues on incentive design... the whole issue to detect abuse like displacements, bringing penalties for abuse. People felt that we shouldn't start it at too low an age range because you didn't want young people to leave school and find work."

The incentives would apply to workers earning between R4 000 and R6 000. Treasury said the incentive scheme would not lead to subsidised workers earning more than their unsubsidised colleagues.

"The wages will be the same whether you are subsidised or not subsidised. The difference is to the employer because the employer will presumably pay the same, but if you subsidise, the employer is getting something back for the subsidised worker."

Unions' concerns on deadweight loss were also dealt with, with Treasury conceding it was something it could do little to prevent.

Deadweight loss occurs when a company would have employed a person anyway, without the subsidy.

"Yes, for every incentive we have, there's deadweight loss... You try to minimise that but you can't eliminate that," Momoniat said.

Edited by Sapa

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