Tackling Youth Unemployment

This is the third post in my series on the DA's Working for Change, Working for Jobs campaign.


A full copy of the DA's Youth Jobs Plan can be downloaded here.

South Africa’s most urgent challenge is youth unemployment.

Last week, the DA put forward its proposals to improve quality, access and accountability in the education system. Overhauling our education system is the key to unlocking the door of opportunity for young South Africans.

That door currently remains shut because the ANC does not have the political will to open it in the face of policy division and opposition from its alliance partners.

If we are to open that door, and give millions of young South Africans the chance to participate in the economy, we need policies that make it easier for young South Africans to enter employment.

The R5 billion Youth Wage Subsidy that was supposed to be implemented by Treasury in April 2012 has been blocked by Cosatu. Because they don’t have the guts to take on Cosatu in the months leading up to the Mangaung conference, ANC leaders have started “talking down” the wage subsidy and “talking up” what they call a ‘job seekers’ grant’.

At its recent policy conference, the ANC proposed that the R5 billion appropriated for the Youth Wage Subsidy could be used in part to fund this ‘job seekers’ grant’. The ANC remains vague on what such a grant would entail because it has not thought it through properly.

Recently, an ANC Youth League leader reportedly admitted that the job seekers’ grant proposal was thrown into a league press conference at the last minute, when it became apparent that the league had no alternative to the wage subsidy to present to the media. 

Then, much to the league members’ amusement, the proposal suddenly appeared in President Zuma’s speech at the ANC policy conference.

The truth is that the job seekers' grant proposal is not a genuine attempt at policy-making for job creation. It is a holding pattern designed to keep the ANC alliance partners happy until Mangaung is over.

Tragically, millions of unemployed youths will be stuck in this holding pattern. The ANC’s internal divisions trump the needs of the South African people once again.

The key point about the DA’s proposed Youth Wage Subsidy is that it would get unemployed young South Africans onto the first rung of the ladder of the economy.  On the basis of this foothold, they would gain skills and become productive participants in the economy.  This is entirely different from a job seekers’ grant that would provide no leverage to get young people into the economy.  On the contrary, it would provide yet another grant that would entrench unemployment and even potentially incentivise young people to stay out of work.

For example, a 2011 report by the OECD raised concerns about the negative impact that the duration of unemployment benefits had on “duration dependence”. Duration dependence refers to the probability that the longer a person is unemployed, the harder it will be for them to find work.

The jobs seekers’ grant proposal is based on a misdiagnosis of the problem at the heart of the South African labour market.

It assumes that there are many jobs available for young people out there if only they were given the wherewithal and the funding to go and find those jobs.

But the problem is that these jobs do not exist - chiefly because of the high cost of doing business, in both financial and non-financial terms, and our inflexible labour legislation. Lowering the cost of doing business and making labour legislation more flexible is imperative to creating youth jobs. This, coupled with the proposed Youth Wage Subsidy which incentivises the employment of unskilled young people, is the plan South Africa needs.

The DA’s strategy to tackle youth unemployment, unlike the ANC’s, recognises that both supply and demand side interventions are needed.

On the supply side, young South Africans need to be equipped with the knowledge and skills that the economy needs to grow. The plan we outlined last week is designed to ensure that we are creating such a pool of skills.

To sustain our changing economy’s demand for higher-value jobs, higher-value skills are required. Only specialised tertiary-level and technical skills training can generate these. The focus of the DA’s policies to ‘up-skill’ the supply side of the labour market equation is therefore on expanding access to further education and training, to help young people gain industry-specific knowledge and experience.

Central to this is the provision of an opportunity voucher scheme, which would provide funding to young adults who would like to start their own businesses or further their education and skills development.

The scheme would be structured as follows:

• Vouchers would be allocated according to strict requirements based on an assessment of the skills needed to accelerate economic growth.
• Vouchers would be available to individuals who have completed matric and would be designed to help pay for further education, and boost the small business sector. The voucher would entitle the graduate to (a) a partial subsidy of university or FET college fees; (b) seed capital to establish small or micro enterprises subject to a well-formed business plan; and (c) a state guarantee to cover loans extended by commercial banks to graduates to establish small or micro enterprises subject to a coherent business plan and other requirements.
• The value of the voucher would be up to a maximum of R6000, and would vary according to the region where the applicant is applying.
• The voucher would be paid over three years, i.e. R2000 per year. Where the voucher is utilised to pursue further education and training, funding for the second and third years would be conditional on the recipient passing his or her exams. For recipients seeking to establish small businesses, qualification for second and third year funding would be based on an assessment of the commercial viability of the enterprise.

The DA also proposes a range of additional interventions to boost the supply of productive labour in our economy.

To equip young South Africans with the knowledge and skills demanded by the economy, the DA would:

• Introduce a Vocational Training and Apprenticeship Programme: The DA would introduce a nation-wide Vocational Training and Apprenticeship Programme (V-TAP) that would be administered by the Department of Education and implemented by provincial education departments. The programme would be run as a collaboration between public and recognised private Further Education and Training (FET) Colleges and employers, and would be open to learners who have completed Grade 9, and who are aged 16 or older. Key features of the programme would include:

1. Access to a wide range of apprenticeship opportunities, from hairdressing to construction work and electrical engineering.
2. Coordinated training that will sync professional development with classes taken at the FET college.
3. Apprentices will be paid a small salary to be negotiated with employers, which will be subsidised with a stipend paid by the relevant education department. The amount will increase each year as the apprentice’s skills advance.
4. The normal duration of the programme will be three years, after which apprentices will take an exam run by the Chamber of Commerce and Industry. If successful, graduates of the programme will receive an accredited V-TAP Certificate. This may be upgraded to a Diploma-level qualification by continuing with an additional year of coursework at an FET college.

• Expand the National Student Financial Aid Scheme: The National Student Financial Aid Scheme (NSFAS) should be expanded to provide full funding assistance to cover tuition, books, accommodation and maintenance stipends (which may include additional loans and bursaries) to all qualifying students. A programme of state sureties for students who do not qualify, and who seek student loans from commercial banks, should also be developed.

On the demand side, the powerful disincentives to hiring young and inexperienced job-seekers need to be reversed. Employers are often unwilling to take on young first-time job seekers because they lack experience (even though they may have the right qualifications).