Working Paper
A policy for the jobless youth in South Africa

Individual impacts of the Employment Tax Incentive

This paper uses survey and tax administrative data to analyse the effects of a sizeable employer-borne payroll tax credit for young, low-wage workers in South Africa. We find limited impact of the wage subsidy on employment of young, low-wage workers relative to two comparison groups: slightly older, low-wage workers and slightly higher paid, young workers.

We find evidence of increases in entry into employment and decreases in separations of low-wage youth, but these are too small to affect overall employment. However, the female employment rate has increased and unemployment among women has dropped because of the policy. We find evidence to suggest the policy has led to a rise in earnings, particularly for men and those earning around the maximum subsidy value.