Collage of seminar photos. © UNU-WIDER

Amina Ebrahim on the effects of a youth wage subsidy on South African employment

WIDER Seminar Series

On 06 June, UNU-WIDER Research Associate Amina Ebrahim talks about the South African youth wage subsidy. 

Abstract - The effects of a youth wage subsidy on South African employment: An update

South Africa’s Employment Tax Incentive (ETI), launched in 2014, aimed to address low youth employment by reducing the cost of hiring young workers.

We make use of anonymized tax administrative data from the 2012 to 2015 tax years to examine the effect of the wage subsidy on youth employment. We match firms claiming the subsidy with similar firms not claiming the subsidy and observe their hiring behaviour before and after the implementation of the policy.

At the aggregate level of youth employment, we see a positive significant change in the number of youth employed the 2015 tax year. The estimated effect is 3.258 additional jobs were created in ETI firms. The result only holds true for firms with less than 1200 employees. We are unable to credible match firms with more than 1200 employees as the take-up rate for these very large firms is very high, leaving few very large non-ETI firms with which to match.