Prospective Analysis of a Wage Subsidy for Cape Town Youth

Levinsohn, James; Pugatch, Todd

doi:10.3386/w17248

Cited by 4 publications

(3 citation statements)

References 14 publications

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“…If youth who are nonparticipants are considered searching in the model, then the estimates might overstate learning about employability because a period of nonparticipation would be treated as a failed job search. However, a companion paper using CAPS (Levinsohn and Pugatch, 2014) finds that 64 per cent of those who permanently exit school and never report searching nonetheless find employment by the end of the sample, suggesting that labor market participation is not synonymous with active search for these youth. Any resulting bias should therefore not be very large.…”

Section: The Cape Area Panel Studymentioning

confidence: 98%

Bumpy Rides: School‐to‐work Transitions in South Africa

Pugatch

2017

Labour

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Re-enrollment in school following a period of dropout is a common feature of the South African school to work transition that has been largely ignored in both the literature on South Africa and the wider literature on sequential schooling choice. In this paper, I quantify the importance of the option to re-enroll in the school to work transition of South African youth. I estimate a structural model of schooling choice in South Africa using a panel dataset that contains the entire schooling and labor market histories of sampled youth. Estimates of the model's structural parameters confirm the hypothesis that enrollment choices reflect dynamic updating of the relative returns to schooling versus labor market participation. In a policy simulation under which re-enrollment prior to high school completion is completely restricted, the proportion completing at least 12 years of schooling rises 6 percentage points, as youth who would have dropped out under unrestricted re-enrollment reconsider the long-term consequences of doing so. The results suggest that the option to re-enroll is an important component of the incentives South African youth face when making schooling decisions.JEL Classification: I21, J24, O12

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Section: The Cape Area Panel Studymentioning

confidence: 98%

Bumpy Rides: School‐to‐work Transitions in South Africa

Pugatch

2017

Labour

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“…Several studies conducted after the ETI was proposed in 2010 were of the opinion that it had the potential to change the employment prospects for youth (Burns et al 2010;Levinsohn and Pugatch 2014;Mtembu and Govender 2015;National Treasury 2011). Burns et al (2010) argued that the wage subsidy might be successful in creating jobs in South Africa if it was associated with skills training, especially in industries that are sensitive to labour costs, and should have a focus on youth.…”

Section: The Employment Tax Incentive Policymentioning

confidence: 99%

“…Burns et al (2010) argued that the wage subsidy might be successful in creating jobs in South Africa if it was associated with skills training, especially in industries that are sensitive to labour costs, and should have a focus on youth. Levinsohn and Pugatch (2014) suggested that the wage subsidy could decrease the share of youth experiencing long-term unemployment. conducted a randomized control trial before the policy was enacted to examine how a wage subsidy might affect youth unemployment in the South African context.…”

Section: The Employment Tax Incentive Policymentioning

confidence: 99%

The effects of the Employment Tax Incentive on South African employment

Ebrahim¹,

Leibbrandt²,

Ranchhod³

2017

WIDER Working Paper

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South Africa's Employment Tax Incentive, 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 2012-2015 tax years to examine the effect of the Incentive 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. We find no statistically significant impact on youth employment on average. We see a positive and statistically significant effect on youth and non-youth employment in firms with fewer than 200 employees. However, we cannot distinguish whether the increase is due to the policy or to employment growth within the firm.

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Evidence for a YETI? A Cautionary Tale from South Africa's Youth Employment Tax Incentive

Muller¹

2021

Development and Change

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In 2014 the South African government implemented a youth employment tax incentive (YETI) scheme to address the high rate of youth unemployment. Its adoption has been hailed as a success story for evidence-based policy. This article critically assesses that claim, focusing on the randomized trial of a wage-subsidy voucher that was used to justify the adoption of the policy and econometric analyses of the incentive's efficacy that were used to justify its renewal. That evidence is shown to be materially flawed. The design of the randomized trial meant that its relevance to the policy question was limited and critical issues pertaining to the estimated effect of the intervention, external validity and scale-up were not addressed. The process was similarly flawed, with evidence only made public after critical legislative decisions had been taken. Analysis of that process shows how supposedly rigorous evidence was used to obscure the limitations and risks of the proposal in service of pre-existing positions, vested interests and political imperatives. This implies a high opportunity cost for the tax expenditures incurred through the incentive. The South African YETI thereby serves as a cautionary tale on randomized trials and the political economy of evidence-based policy, particularly in developing countries.

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Prospective Analysis of a Wage Subsidy for Cape Town Youth

Cited by 4 publications

References 14 publications

Bumpy Rides: School‐to‐work Transitions in South Africa

Bumpy Rides: School‐to‐work Transitions in South Africa

The effects of the Employment Tax Incentive on South African employment

Evidence for a YETI? A Cautionary Tale from South Africa's Youth Employment Tax Incentive

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