The Employment Tax Incentive Act, widely known as the youth wage subsidy, is now in force. The Act, approved late last year, took effect at midnight on Jan 1, 2014.
It is aimed at alleviating youth unemployment, estimated at 70 per cent. The legislation was bitterly opposed by the Congress of South African Trade Unions (COSATU), with the labour federation claiming that it would discriminate against older workers.
Economist Iraj Abedian says: “The legislation is unlikely to cause any instability in the labour market.”
Concerns by unions that employers will abuse the Bill by replacing workers with subsidised employees was cleared by Treasury Deputy Director-General Ismail Momoniat, who told Parliament last year that significant penalties were in place to prevent this.
“The Bill affects those who are not currently employed so perhaps if it does have some sort of economic impact it will not be on labour, it will be those outside of labour who will join the labour force,” he said.
In February 2013, an opposition Democratic Alliance member of parliament, Tim Harris, warned against the subsidy saying: “We’ve had this idea on the table for three years that is accepted across the ideological spectrum.
“This is a no-brainer and it’s been blocked for three years, because of internal issues in the tripartite alliance and effectively, COSATU’s filibustering,” said Harris, referring to the alliance among the ruling African National Congress (ANC), Cosatu and the South African Communist Party (SACP).