3 September 2012

South Africa: Design and Policy Implementation Issues in South Africa's Jobs Fund and Youth Wage Subsidy

Photo: Abokoe Sibanda
According to the Adcorp Employment Index, employment fell at an annualised rate of 0.23 percent, following sharp declines of 3.1 percent in May, two percent in June, and stalled employment numbers in July.


The South African Government is increasingly experimenting with the introduction of numerous policies and programs to fight what appears to be an obstinate unemployment problem.

Among the latest of the country's policy artilleries launched and proposed in the battle against joblessness are the Jobs Fund and Youth Wage Subsidy to complement existing Active labour Market Policies (ALMPs).

In particular, the youth wage subsidy continues to be the subject of controversy among politicians and trade unions over its desirability.

Effectively both the programs seek to provide temporary relief to employers by reducing the cost of acquiring and or training labour, particularly the youth.

Performance of similar programs internationally has been uneven over the years even leading to their abandonment. Evidence point to proper design and implementation as the key determinant of success.

However, the focus of policy makers in South Africa appears to be fixated on how these interventions increase jobs directly. Optimal design, not only ensures overall effectiveness but also minimises some common, unintended consequences associated with ALMPs. This study provides a review of South Africa's newly introduced ALMP programs against best international practices and the context of unemployment conditions. We conclude that in their current form the Jobs Fund and Youth Wage subsidy require some level of redesign to maximise labour market outcomes.

This is an abstract of a paper prepared for Towards Carnegie III, a major conference aimed at devising strategies to overcome poverty and inequality. Eddie Rakabe is from the Financial and Fiscal Commission.

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