Government is considering establishing a fund to support business, aimed at increasing employment.
According to the Medium-Term Budget Policy Statement (MTBPS), tabled at Parliament on Tuesday, the fund will be made up largely of existing spending programmes and tax breaks, with clear, measurable job-creation targets.
The MTBPS says creating jobs, particularly among millions of relatively unskilled workers, remains the greatest economic challenge, and all policy choices must be informed by the need to create more jobs.
It says low employment is the direct cause of high levels of inequality and marginalisation.
According to the document, total employment declined by 3,5% between the fourth quarter of 2008 and the second quarter of this year, compared with annual growth in employment of 2,4% a year between 2002 and 2008.
The labour market is likely to remain weak over the medium term due to slow recovery in the economy and upward pressure on wages.
In addition to job losses, the number of people who are no longer actively seeking employment grew by 409 000 between December 2008 and June 2009.
While official unemployment has remained reasonably stable at 23,6%, the broad measure of unemployment has risen to 29,7%, from 26,7% in December 2008.
The MTBPS says poverty and income inequality are expected to grow in the immediate future as a result of higher unemployment and reduced incomes.
While most jobs are created by the private sector, government plays an important role by shifting resources towards labour-intensive sectors and creating jobs directly in the delivery of public services.
Current policy options available to government to boost employment include:
- Expanding labour intensive services, such as home-based care, refuse removal, building maintenance, grass-cutting, rural road construction, securing government buildings, such as schools, and cleaning up environmentally sensitive areas, such as rivers, lakes and wetlands;
- Changing the orientation of industrial incentives to focus on labour-intensive industries;
- Using the tax system to encourage employment. Government can consider using the income tax system to provide incentives to employers to hire staff, lowering the cost of employment without affecting wages. Similarly, government can subsidise social security contributions (such as unemployment insurance) for low-income workers;
- Making greater use of research and development capacity and innovation to support job creation by the private sector. Similarly, responding to the climate-change challenge provides the opportunity to increase investment and employment in ”green” technologies;
- Introducing a targeted voucher to help matriculants enter the workforce. Such a voucher could either be used for further education and training, or be presented to an employer willing to hire the school leaver, helping young workers gain skills and experience; and
- Implementing a coherent rural development programme, including support for access to agricultural markets, training and assistance to small farmers. Rural infrastructure projects tend to be labour intensive, with positive effects for community livelihoods.
The MTBPS states that over the medium term, government intends to play a greater role in drawing more South Africans into work that complements skills development and enhances service delivery. — Sapa