South Africa is characterised by its high and persistent level of unemployment, in particular among the youth. The high youth unemployment is attributed to various reasons, ranging from their lack of work experience, skills mismatch to employment and wage rigidities. The South African government proposed the youth wage subsidy to be implemented in 2011, with the primary aim of solving the youth unemployment problem. This study starts by providing a literature review on the youth labour market trends since the transition; it emerged that there is a lack of studies focusing exclusively on how youths fare in the labour market. Next, the demographic and educational attainment characteristics of the youth narrow labour force, employed and narrow unemployed are analysed under the narrow or strict definition, using the 1995-1999 October Household Surveys (OHSs), the 2000-2007 Labour Force Surveys (LFSs) and the 2008-2011 Quarterly Labour Force Surveys (QLFSs). With regard to unemployed youths, it is found that they are more likely to be blacks, without Matric and have never worked before. The main causes of youth unemployment are then discussed in detail, before the thesis moves on to examine the various active and passive labour market policies that could help to address the youth unemployment problem. The possible pros and cons of the youth wage subsidy, one of the active policies and the focus of this study, are discussed in greater detail. In particular, the claim by institutions such as COSATU that the introduction of the subsidy would lead to elderly workers (who are not subsidised) being replaced by the youth workers (who are subsidised) is not entirely correct, as these two groups of workers could be complementary instead of substitutes, and the introduction of the subsidy programme could result in an increase of demand for both elderly and youth workers. It is concluded that, although the youth wage subsidy could be one of the feasible solutions to stimulate demand for youth labour, it is not sufficient to address youth unemployment. It needs to be complemented by the other policies, such as a job search subsidy (targeting discouraged work seekers) and public employment programmes (e.g. Expanded Public Works Programme); but it is most important to note that these policies could only be fully effective if the root causes of youth unemployment are addressed by the government. / Magister Economicae - MEcon

A quarter of the labour force in South Africa is currently unemployed. The majority of the unemployed are between the ages of 18 and 29 years. The causes of these poor employment statistics has been widely debated, however, the cost of unskilled South African labour is a common thread. One of the solutions to improve the statistics is to implement tax incentives to reduce the cost of labour, which would theoretically increase the demand of the labour. Countries such as the United States of America have implemented some form of tax incentive to promote job creation over the years. South Africa has, however, not used this alternative to deal with unemployment. The problem had escalated to such a state that the Government announced in 2011 that it would spend R5 billion on job creation and announced that the funds would be spent through the implementation of a youth wage subsidy. Current studies on policy choices to promote job creation in South Africa discuss the possible tax incentives which could be implemented. However, these studies have not evaluated the successes of these incentives in other countries and whether it would be possible to apply them to a South African context. The proposed youth wage subsidy has not been analysed in terms of the incentives implemented in other countries to determine whether or not they would be successful in South Africa. The aim of the study was to determine if there was a gap in the tax legislation with regard to motivating job creation and how this gap could best be filled. This was achieved by firstly, analysing the key causes of unemployment in South Africa, and secondly, determining whether any of the current tax legislation measures deal with those causes. Two tax incentives implemented in the United States of America were analysed for their successes and failures in order to determine what South Africa needs to do if it was to implement any similar incentives. Finally, the National Treasury’s discussion paper on its proposed youth wage subsidy was analysed against the findings identified above to determine whether the subsidy is viable in the South African labour market. AFRIKAANS : ’n Kwart van die arbeidsmag in Suid-Afrika is tans werkloos met die meeste werkloses tussen die ouderdom van 18 en 29 jaar. Daar word reeds geruime tyd geredeneer oor die oorsaak van die swak arbeidstatistieke, tog is daar ooreenstemming dat die koste van ongeskoolde arbeid in Suid-Afrika ’n bydraende faktor is. Belastingaansporings wat die koste van arbeid verminder en dus teoreties die vraag na arbeid verhoog, kan moontlik die swak arbeidstatistieke verbeter. Lande soos die Verenigde State van Amerika het met verloop van jare sekere belastingaansporings ingestel om werkskepping te bevorder. Suid-Afrika het egter nog nie dié alternatief gebruik om die probleem van werkloosheid aan te pak nie. Die probleem het sulke afmetings aangeneem dat die regering in 2011 bekend gemaak het dat hy R5 biljoen aan werkskepping sal bestee in die vorm van die implementering van ’n jeugloonsubsidie. Huidige navorsing oor beleidskeuses om werkskepping in Suid-Afrika te bevorder, handel oor die moontlike belastingaansporings wat ingestel kan word. Dié navorsing evalueer egter nie die sukses van hierdie aansporings in ander lande of die moontlikheid van die toepassing daarvan op Suid-Afrikaanse omstandighede nie. Die huidige navorsing ontleed ook nie die voorgestelde jeugloonsubsidie aan die hand van die aansporings wat in ander lande ingestel is om sodoende te bepaal of dit hier sal slaag nie. Die doel van die navorsing was om te bepaal of daar ’n gaping in die wetgewing oor belasting is ten opsigte van die aanmoediging van werkskepping en hoe sodanige gaping ten beste gevul kan word. Dié navorsing het in sy doel geslaag deur eerstens die sleuteloorsake van werkloosheid in Suid-Afrika te ontleed en tweedens te bepaal of enige van die huidige belastingwetgewingsmaatreëls daardie oorsake aanspreek. Die sukses én mislukking van twee belastingaansporings wat in die Verenigde State van Amerika ingestel is, te ontleed ten einde te bepaal wat Suid-Afrika moet doen indien hy enige soortgelyke aansporings sou implementeer. Ten laaste is die besprekingsdokument oor die voorgestelde jeugloonsubsidie van die Nasionale Tesourie ontleed aan die hand van bogenoemde bevindings om te bepaal of die subsidie in die Suid-Afrikaanse arbeidsmark lewensvatbaar sou wees. / Dissertation (MCom)--University of Pretoria, 2012. / Taxation / unrestricted