Youth wage subsidy pushed aside while factions -- and politicians -- struggle for power.
Is the star of Ebrahim Patel, the minister of economic development, on the rise?
The rise and sudden fall of the proposed youth wage subsidy as part of economic policy suggests that it is.
The Democratic Alliance has claimed—which the ministry has roundly denied—that Patel is at the heart of an ideological stand-off in the Cabinet. He is seen as stalling key economic policy interventions, such as the youth wage subsidy, while a power struggle is being waged among factions in the tripartite alliance.
The subsidy was announced with much fanfare in Jacob Zuma’s State of the Nation address and was again raised in February’s pragmatic budget.
Pravin Gordhan, the finance minister, said in his speech at the time: ‘Labour market data confirm that employers are reluctant to hire inexperienced work seekers, while school leavers lack basic workplace competencies.
Furthermore, our bargaining arrangements push up entry-level wages, pricing out inexperienced work seekers.” Gordhan said the treasury proposed to support broader labour market reforms, spearheaded by the labour ministry ‘through a subsidy to employers that will lower the cost of hiring young people without work experience”.
But a discussion document on the proposal promised in March has not materialised. Instead, the left, and particularly labour union federation Cosatu, has condemned the idea.
It argues that a youth subsidy will exacerbate problems in a labour force already divided into workers protected by the law and more employees made vulnerable by subcontracting, labour broking and casualisation. Patel’s appointment was seen as a concession to labour for its support during Zuma’s ascendancy to power.
Kimani Ndungu, a researcher for the labour affiliated think-tank Naledi, said incentives such as a wage subsidy would simply allow employers to use labour to maximise profi ts. He argues that the cost of labour is not the only problem affecting employers’ decisions to hire—skills are equally problematic, both the skills level and kind of skills young people are likely to have.
If these underlying deficiencies are not addressed, a short-term solution will not ease youth unemployment. But DA MP Tim Harris argues that youth unemployment should be dealt with as a matter of urgency.
According to him, about three-quarters of South Africa’s unemployed are between 15 and 34 and the longer they are out of work the more unemployable they become. Harris says that lowering the costs of labour, particularly for small business, will be crucial to tackling youth unemployment.
Many private sector economists back this view. But the government’s enthusiasm for the idea has waned . The treasury appears to have backed away from its clear declaration, saying instead it is considering a number of proposals to address youth unemployment and that the subsidy is one of them.
Lindani Mbunyuza, the treasury spokesperson, said a discussion document had been drawn up and was being circulated in Cabinet clusters. ‘Treasury’s position is the president’s position,” she said. But President Zuma and Deputy President Kgalema Motlanthe have both merely made commitments to discuss the subject further.
Denying the DA’s claim that Patel is championing efforts to block the wage subsidy proposal, the department of economic development said in response to the Mail & Guardian‘s questions: ‘The youth subsidy is one element of a concerted strategy to reduce youth
A number of proposals are being identified that, taken together, will constitute a decisive intervention to address youth unemployment and produce lasting effects on the economy and society.”
Zubeida Jaffer, the department’s spokesperson, said that the subsidy was not off the table. Many ideas were being discussed in the Cabinet, although details could not be made public until the discussions had been completed, she said.
The difficulty of developing and implementing economic policy is further complicated by the fact that there is still no clear decision by Zuma on who should steer it. He emphatically supports Gordhan, Patel and Trevor Manuel, the minister for national planning , in all that they do.
They all have, or are purported to have, some influence over economic matters but none is given authority over any of the others. So Zuma’s rule by consensus is effectively hampering three effective politicians.
But the demise of support for the youth wage subsidy suggests that more room is being made for Patel and his supporters to influence policy development and debate. Yet as rifts in the alliance become deeper, it remains to be seen whether Patel’s star will stay on the rise. But a sad reality underlies all of this.
The debate over a subsidy is simply a proxy for bigger battles being played out in the upper reaches of government. And, as long as that fight is being waged, young people continue to go without hope. Zuma’s prevarication—the endless room he seems to give to his Cabinet to fight it out among themselves—means delivery is endlessly delayed.