South Africa’s youth unemployment figure ranks among the worst in the world and is
one of the country’s major macro-economic challenges. Research identified the most
significant cause of youth unemployment as being the high cost of labour in relation
to the level of productivity by the youth of the country. The government is
consequently attempting to reduce the cost of labour by means of the Employment
Tax Incentive Act which subsidises employers for appointing new workers below the
age of 29.
The study reviewed international research performed on similar globally
implemented incentive programmes, which established that the majority of wage
subsidy programmes do not appear to have a net positive impact on the longer-term
employability of the participants in these incentives. This was found to be particularly
so in the case of developing countries, such as South Africa.
The interaction between the Employment Tax Incentive Act (No 26 of 2013) and the
proposed Special Economic Zones Bill was also evaluated by reviewing international
research on geographically targeted wage subsidies. The research identified that
incentives tied to the number of new jobs created within targeted areas are able to
raise employment levels within those areas. However, the increased levels of
employment within targeted areas are frequently offset by the consequent decreases
in employment levels in surrounding areas, resulting in an absence of net impact.
The study also found that when geographically targeted wage subsidies are used in
conjunction with other forms of business incentives, existing establishments are,
resultantly, at a competitive disadvantage. This causes business closures and loss of
employment, which once again neutralises the positive effects of the new
employment opportunities created by the subsidy.
In the study, it was established that wage subsidies, such as those proposed by the
Employment Tax Incentives Act, are probably not the answer to raising employment
levels. Furthermore, the Employment Tax Incentives, used in conjunction with the
proposed Special Economic Zones Bill, are also unlikely to yield any significant
increase in employment levels in these specific zones. Recommendations were
made for future research relating to international experience with other forms of
active labour market programmes and the outcome of the Employment Tax
Incentives, on the country’s employment levels, when actual data and statistics
become available. / MCom (South African and International Taxation), North-West University, Potchefstroom Campus, 2015
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nwu/oai:dspace.nwu.ac.za:10394/15531 |
| Date | January 2015 |
| Creators | Roux, Johan |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
Page generated in 0.0016 seconds