COSATU has reiterated its position on the government's proposed R5-billion youth wage subsidy, saying that it will lead to companies retrenching older workers.

Cosatu general secretary Zwelinzima Vavi said the government's idea was "peddling an illusion" that jobs for young workers could be created by taxpayers subsidising firms to hire them at a lower cost.

Last year Finance Minister Pravin Gorhdan said the youth subsidy would be implemented from April this year. He said 42% of young people between the ages of 18 and 29 were unemployed and that this fact could not be viewed as a mere statistic.

A document tabled in Parliament on the youth employment subsidy explained that it would cover 423,000 young workers.

But Vavi yesterday argued that the youth wage subsidy would encourage companies to employ more young people and retrench older workers.

"The clear danger is that employers will simply retrench an equal number of older workers and thus create no more jobs overall."