The proposal for a youth wage subsidy in South Africa is not new and has in fact garnered significant political attention and debate amongst its supporters and detractors. The aim of this paper is not to get entangled in the political noise surrounding these policy option save to propose it as a viable option.
Burns et al (2010) captures the benefits of a youth wage subsidies in three simple arguments. First, subsidy would reduce the perceived financial cost, held by employers, about the potential young workers in relation to their potential productivity. Secondly, the subsidy can act as an incentive to encourage employers to train young workers. Thirdly, the subsidy is likely to encourage more active job searching because young people would believe that with effort it is possible to find work (Burns, 2010).
A youth subsidy alone will not solve youth unemployment but it can contribute to young people gaining work experience, accessing decent jobs in the formal economy, and improving their employment prospects in the long term. By bringing down the real cost of hiring young and less skilled people, reducing the risk associated with their employment, real jobs can be created for people largely locked out of the labour market(Burns, 2010; Schussler 2012).
Training is of course a vital component that must accompany the work experience of young people so that their productivity is enhanced and that they may remain in the employ of the company (or become re-employable) even when the subsidy expires (Burns, 2010; Schussler, 2012; Blumenfeld, 2012).
It is worth noting the pitfalls to a youth wage subsidy for the sake of a balanced argument. Employment gains can come at the expense of other workers who are effectively substituted in favour of those that are attached to a subsidy (Burns, 2010; Schussler, 2012; Blumenfeld, 2012). The ‘churning effect’ is also dangerous where a recycling of workers from one employment period to the next, in the absence of proper monitoring. The financing of a wage subsidy programme has obvious implications for the national budget. Additional revenue is likely to create additional taxation. Lastly, imperfect market conditions can undermine the impact of a youth wage subsidy. For example; a dominating firm in a particular industry may be able to capture some of the subsidy as rent. Where competitiveness is weak in a given industry, the wage subsidy incentive is also weakened (Burns, 2010; Schussler, 2012; Blumenfeld, 2012).

What is clear is that for a youth wage subsidy to be effective, careful consideration must