Aug-Sept 2014 K.indd

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AUG/SEPT 2014 • www.cosatu.org.za

A view from NEDLAC chambers

Nedlac’s Labour Market Chamber and the Employment Incentive Tax Act (EITA) By Jonas Mosia

T he reports in the media that Em ployment Incentive Tax serves labour brokers comes as no surprise to representatives of Labour at NEDLAC, because Cosatu has warned Government in advance – on several occasions - about the unin tended consequences of undertaking a policy measure which was not subjected to full stakeholder agreement and social partner participation. Labour still con tends that the enactment of the Employ ment Incentive Tax act (EITA) was not subjected to stakeholder participation therefore not duly a NEDLAC process. It was reported in the City Press on 27th July 2014, and the same report appeared on the South African Labour News (SALN) website on the 28th July 2014 that Labour Brokers absorb the Youth Incentives meant for Employers. There’s now little that can be done about that, it is water under bridge and the damage is done. The fact that labour in termediaries are fi rst bene fi ciaries of the scheme and AdCorp had already made R7 million from the scheme, boosting the group’s pro fi t by 14% is not Ad Corp’s fault, is bad policy design. If large providers of contract labour are absorb

ing the incentive, it does not only mean that lower cost of employment don’t fi nd their way to broker’s client fi rms, it means poor policy instrument progno sis on the part of policymakers. It was incorrect for those charged with con ceiving, formulating and implementing policy to cite low wages as an incentive to boost and create new employment. It indicates - even to the uninitiated - that entry level wage rates are already low by any measure of standard such that client fi rms don’t need any boosting to cover their wage bills. It also shows that with or without subsidy/incentive the demand for labour is unrelated to some perceived notions of worker productivity as stated in policy documents, or some expected wage rate by workers since workers in no way set their wage upon acceptance of a job. To this end, Cosatu had made it clear from the onset that wage subsidies cloaked under some dubious euphe mism of employment incentives will work to boost enterprises’ pro fi tability levels instead of stimulating employment growth and job creation. Whether it is the client fi rm or the labour broking in termediary bene fi t from the Employment

incentive scheme is now irrelevant, the point is the policy measure has missed, by a big margin, its objective and has used a faulty instrument in its operation. As Marcus Mosiah Garvey once said ‘A nation without a past history of its origin is like a tree without roots’ In cog nisance and observation of this saying, perhaps some history of processes be hind and leading up to the enactment of the employment incentive tax may shed some insights as to why Labour repre sentatives are not astounded an inch by the reports that labour brokers absorb the bene fi ts. Processes leading up to the Youth Wage Subsidy, Employment Incentive Tax and the Youth Employment Accord: 1.Youth Employment Policy Document 1.1 In 2011 the National State Depart ment, namely, the National Treasury published, for discussion, a policy document titled “Confronting Youth

Worker Issues

Unemployment in South Africa: Policy Options”. In the document proposed was a wage subsidy