The National Treasury has proposed the introduction of a youth employment tax incentive to assist South Africa’s young work seekers in gaining valuable work experience and access to employment.
“Following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House [Parliament], together with a proposed employment incentive for special economic zones,” Finance Minister Pravin Gordhan said in his 2013 Budget address to Parliament on Wednesday.
National Treasury stated that government recognised the need to share the costs of expanding job opportunities with the private sector.
The tax incentive was aimed at encouraging firms to employ young work seekers and would complement government’s existing programmes to deal with youth unemployment. These programmes focused on training, skills development, labour market activation and short-term public employment.
Treasury put forward that the “administratively simple” youth employment tax incentive would create a graduated tax incentive at entry-level wage, falling to zero when earnings reach the personal income tax threshold.
Government would prevent the displacement of older workers as a result of the youth employment drive through existing labour legislation, in collaboration with the South African Revenue Service and the Department of Labour.
This came as the 2013 Budget was the first to be tabled within the framework of the National Development Plan (NDP) that set out an integrated strategy for accelerating growth, eliminating poverty and reducing inequality, recognising that South Africa’s urbanising, youthful population was central to achieving this objective.
Several strategic imperatives emerged from the NDP, including that, while one-million people leave school every year in South Africa, the economy had yet to adapt to the imperative of more rapid job creation.
Youth unemployment remained rife in South Africa, with more than 40% of those who were economically active and under the age of 30 having no job. This resulted in the level of the country’s unemployed youth reaching 2.5-million.
Low levels of demand, lack of experience, divergence between job search and firm hiring strategies, an absence of appropriate skills, as well as inadequate networks contributed to lower employment prospects for unemployed young.
To date, interventions to encourage the private sector to hire younger workers have proven inadequate.