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WAGE subsidies, which the finance minister proposed in his budget speech last week, are a step in the right direction - as long as they do not end up entangled in red tape, economists said yesterday.
Minister Pravin Gordhan proposed the introduction of wage subsidies as a way to encourage employers to hire inexperienced youth and help to dent the ballooning army of unemployed.
He said employers were reluctant to take on workers who had no experience, and school leavers lacked basic workplace competencies.
"Under consideration is a cash reimbursement to employers for a two-year period, operating through the Sars payroll tax platform and subject to minimum labour standards," he said.
Gordhan estimated that 800 000 people aged between 18 and 24 would qualify.
The National Treasury said the unemployment rate for people aged 18-24 was 48,2percent, while the national average is 24percent.
Various cost estimates are being bandied about, but Andrew Donaldson, head of public finance at the National Treasury, said estimates of between R2billion and R6billion were preliminary.
Donaldson said the subsidies would most likely be designed around the current monthly old-age pension of R1070.
"The minister also indicated that he has in mind a subsidy that is below the tax threshold which is currently R57000 a year," he said.
"Therefore, the wage subsidy will most likely be around R700 a month, but nothing is really firm yet."
Youth who do not have the means to further their education will qualify for the subsidy when they turn 18, but cannot apply after their 24th birthday.
Employers who give the youngsters their first job can claim the subsidy for two years.
Chris Hart, an economist at Investment Solutions, said the wage subsidies could be effective, but "at the end of the day the wage structure will end up in another government department with red tape to access it.
"It's a positive development but if barriers that exist for small businesses to enter the market are removed, small businesses could provide millions of jobs if given the mechanism to do so."
Stanlib economist Kevin Lings said: "What is absolutely crucial when this is implemented is that they publicise it very widely and repeatedly.
"Small businesses especially need to be aware of these details, how the subsidies work and how they can utilise and access this system." - Additional reporting by Anton Ferreira