Youth unemployment policy

This chapter examines youth unemployment in South Africa. The high youth unemployment rates are attributed to a combination of skill-biased technical change; an influx of undereducated workers into the labour market; social unease about the wage that might otherwise clear labour markets; uneven and often poor schools; and worker dismissal rules that inhibit more fluid labour market dynamics. A policy that is actively being considered is a targeted wage subsidy to facilitate the school-to-work transition. The chapter describes how a target wage subsidy works; presents the economic argument for this policy; and discusses some implementation issues.