There is a way to immediately help South Africa’s unemployed youth and the thousands of small and medium sized enterprises (SMEs) barely alive after a year of economic lockdown and a decade of policy lockdown. There can be no serious debate that these two categories of people are in need of urgent economic assistance and hope.
Expanded youth unemployment in South Africa at latest measurement stands at a frightening 75%. Three out of every four young South Africans do not have a job. This is catastrophic for several reasons.
Young people are increasingly leaving school with inadequate skills to become active participants in the formal economy. As a staggering example of skills shortfalls, one only has to look at the reality that fewer than 5 out of every 100 Grade 1 learners will end up passing matric with 50% or above in mathematics – a key educational indicator of career success.
The failing of South Africa’s education system to be a reliable source of skills creation and development means that in-work skills development has become one of the only places left for young South Africans to acquire abilities to deliver goods or services consumers are willing to pay for. However, high youth unemployment, following in the wake of an inadequate education system, means young people, who should be entering employment and benefiting from in-work upskilling, are excluded from both earning an income to become consumers themselves, as well as the ability to build expanding, in-work, value-adding skills sets that can attract employment and a growing income.
South Africa’s record-high levels of youth unemployment cut off this avenue for the poorest young South Africans to build up earning potential and have a shot at a better life.
This economic exclusion of the poorest South Africans from the formal economy also spells disaster for employers and the government.
Employers have diminishing hopes of finding in an increasingly youthful but under-skilled population the abilities needed to achieve sustainable and growth-enhancing productivity levels. Unproductive businesses become failing ones. Failed businesses mean job opportunities lost.
Beyond the risk of job losses, unproductive businesses are likely to be unprofitable ones. Unprofitable businesses mean lower tax intakes and reduced corporate tax revenue for the state. Reduced tax revenue means less to spend on education and social grants or higher taxes that’ll rob these already struggling business of the consumer spending they need just to keep their doors open. The viciousness of this youth unemployment death spiral should frighten all South Africans – including the government.
However, there is a simple, almost immediate solution that can actually break this poisonous cycle: give young, job-seeking South Africans the freedom to opt out of the minimum wage when seeking employment with SMEs.
No policy change could possibly be a vaccine against any socio-economic problem, but some simple policy changes have the potential to alleviate economic struggle on a massive scale. A youth opt out from South Africa’s minimum wage regulations is such a change with immense potential.
At the stroke of a pen, having been priced out of jobs for too long, young people will gain access to the first rungs of the ladder of upward socio-economic mobility through employment. Far from being the hiring risks government has made them, young, eager South Africans will become a valuable investment for SMEs. The specific cruelty inflicted on younger people by the minimum wage will be rectified to an important extent – for if an employer is forced by government to pay a minimum rate to hire someone, which businessowner in their right mind would opt for a younger, less experienced potential employee if, for the same government-mandated price, they can hire an older person far likelier to be experienced.
The injustice of government actively making the hiring of young people by SMEs expensive, risky and uncompetitive will at last be addressed. The indignity of being excluded from gainful employment, forced to rely on grants paid from an ever-diminishing tax collection will be reversed by the deliberate inclusion of young people into the labour market. From handouts to leg ups in a moment of sensible policy change.
SMEs will, at a time of unprecedented economic and financial strain, find long-overdue relief in being able to expand their capacity and productivity potential that currently is made unnecessarily expensive by government.
A single, limited, rational, and much-needed policy change, in short, can make work and skills development more accessible to South Africa’s unemployed youth, and running a profitable SME more affordable.
Of course, this youth minimum wage opt out should be tide to specific conditions to protect against exploitation and to protect the older employees of SMEs. In the latter case, existing labour law and regulations offer sufficient protection against unfair discrimination on the basis of age, restrictions on retrenchment, and dismissal. SMEs would therefore run significant risks were some to seize upon this policy change and fire their older, more expensive employees. However, the logic of sound business management here will likely act as a firm deterrent to abuse of this youth opt out: older employees almost by definition have superior experience, knowledge, and skills than any potential younger colleague.
Employees hired under this minimum wage opt out should also see, based on productivity and performance, regular and reasonable adjustments to their income as they approach the age where the opt out would no longer apply. This would offer protection against exploitation. Upon reaching the age where such an opt out would no longer apply, employees can make use of existing labour law and regulations to protect them against unfair practices that would see them, in turn, exploitatively replaced by younger hires. These employees would also be shielded against unemployment through the direct advantage of in-work skills development, making them more attractive to prospective employers.
The word ‘crisis’ is often overused in politics, but there is no getting away from the reality that youth unemployment in South Africa is a crisis. A generation of young South Africans are at risk of becoming chronically unschooled and unskilled. This is unnecessary and the government should act now.
South Africa’s youth have had enough of empty rhetoric, broken promises, rubbish schemes, and government-mandated unemployment and poverty.
Were I given a few moments of conversation with President Ramaphosa, I think I know exactly what I will say:
“For once, Mr. President, don’t patronize South Africa’s youth. Give them the freedom to choose employment over unemployment, skills development over systemic dependency, progress over frustration, productivity over poverty. Do what is right – implement a minimum wage youth opt out now. It would show a special type of heartlessness to have a simple solution at hand that will uplift so countless people out of unemployment and economic and financial hardship, and to choose not to implement it.
Mr. President, on youth unemployment, show us you have a heart.”
