The application of a wage subsidy to neutralise the effect of the proposed social-securities tax for low-income workers — as proposed by South African Finance Minister Trevor Manuel — “is completely inappropriate for our economy”, Ian Davidson from the Democratic Alliance said on Thursday.
Davidson said in a statement that in the South African context of high unemployment among unskilled labour, “a wage subsidy would be much more appropriately applied as an employer-directed measure to drive down the costs of employment, thus stimulating growth and employment — creating investment in our economy”.
Davidson proposed an escalating wage subsidy commencing at R1 100 a year, realised in the hands of the employer over a period of three years and targeted at the creation of new employment.
“If Minister Manuel’s intention is to provide relief for low income workers in the face of the new social-security tax, then there are much more appropriate mechanisms at hand. For example through sectorially-determined minimum wage adjustments and, through the introduction of a Basic Income Grant (BIG) — a much called-for and much more appropriate measure with which to counteract income poverty for the unemployed and lower-income groups.”
“The most effective and most sustainable way to improve the wealth disparities in South Africa is to facilitate job creation for unskilled labour — the labour sector in which unemployment and poverty is the rifest.”
In order to achieve this, South Africa needed to put measures, including fiscal incentives, in place to stimulate the supply-side of the economy — which Davidson said was a clear weakness of Manuel’s budget this week.
“A wage subsidy, realised in the hands of employers, would be an ideal way in which to achieve this. We therefore urge Minister Manuel to urgently reconsider his wage subsidy proposal,” said Davidson. – I-Net Bridge