Treasury considers welfare subsidy for lower-income workers
October 30, 2009
By Donwald Pressly
The national Treasury is considering subsidising the social security contributions of private sector workers at the lower income levels.
This emerged from remarks by treasury deputy director-general Kuben Naidoo, who noted that R2.4 billion was already being utilised for the training lay-off scheme "as a contribution towards supporting workers or firms to avoid retrenchments" through providing a training allowance.
This was being drawn not from the main budget but the money nevertheless came from public resources - the Unemployment Insurance Fund (UIF) and the National Skills Fund.
However, Naidoo told the finance portfolio committee that the idea of subsidies "for poor workers", to cover the costs of contributions to the UIF and skills levies, was "one of the ideas" the government was exploring. Although he did not spell it out, this may have to be financed from the fiscus.
Colen Garrow, an economist at Brait, said yesterday he was concerned at the exponential growth of social grants, which have expanded their reach by roughly 600 000 recipients in the past year. The emphasis should, he believe, fall on providing subsidies to companies that employed more workers or took on unemployed people.
This idea of subsidising the social security contributions of workers expanded the welfare net further.
The extension of child support grants up to the age of 18 within three years was being financed effectively by borrowing. In addition there was the question of what happened to the teenager when he turned 18: "He has no job and no grant." This presented a social problem, noted Garrow.
Naidoo said yesterday that it was not clear how many workers would fall into the lower income levels category. "These are initial ideas... the aim is to lower the cost of hiring to the firm and social (insurance) contributions are a cost and so subsidising these is an option."
Garrow said a better way to go was to give subsidised tax credits to companies that created jobs. In the US this had been tried under former president Jimmy Carter and it was found that companies were more likely to take people on if they received a subsidy.
"We should be steering away from dependency grants and subsidies... to the extent that it is absolutely necessary only. We should focus on positive incentives. We need to get people employed in the economy."
He noted that the administration of US President Barack Obama was looking at reintroducing the system.
Finance Minister Pravin Gordhan told MPs this week that it was not the government's intention to "build a welfare state in South Africa". The intention, rather, was to provide an environment where families could live decently. There was always a section of the community "like in any society" where people were not able to look after themselves.
Gordhan, who noted that there was already a system of tax credits for rapid depreciation and trade incentives, emphasised that the government continued to emulate the policies of high growth states, such as Singapore, which had achieved job-creating growth.
"One idea in this week's budget was to set up an umbrella fund to assist small companies to create employment."
He said the government could not ignore the balance "between welfare and work". The key was how one did it.
|
|
