Cape Town - The Covid-19 Temporary Employer-Employee Relief Scheme (Ters) saved at least two million jobs at the onset of the pandemic, but not without several unintended consequences.
In a paper titled Wage Subsidies and Job Retention in a Developing Country: Evidence from South Africa, researchers have discussed how, in a country characterised by extreme unemployment, the Ters was arguably South Africa’s most important labour-market intervention during the pandemic.
The Ters was a wage subsidy – a predominant policy used by governments worldwide to save jobs threatened by the pandemic.
The policy subsidised the incomes of workers who remained employed but had suffered income loss as a result of a full or partial closure of their employers’ operations.
Subsidy amounts primarily depended on a worker’s usual wage and any employer payments to them, but the policy ensured a take-home pay of at least R3 500 (the minimum wage) with a maximum subsidy of R6 730 per month.
Timothy Köhler, a junior research fellow at the Development Policy Research Unit and PhD candidate in the School of Economics at UCT said: “Importantly, the policy ensured that higher-wage workers received larger subsidies in absolute terms, but that lower-wage workers received larger subsidies in relative terms, the share of their usual wage subsidised.”
At its termination, the research found that nearly six million unique workers, equivalent to approximately 70% of the formal, private sector employed population in 2020, had benefited from the policy at a cost of R64 billion.
In their paper, the researchers were able to isolate the causal effects of the Ters on job retention at the onset of the pandemic, but only during April and May 2020, due to data limitations. Using an econometric method applied to a nationally representative sample of formal private-sector employees, they found evidence of a strong, positive effect of the Ters policy on job retention in the short term.
Their analysis showed the Ters increased the probability of remaining employed by nearly 16 percentage points during April and May 2020.
“This effect is not only positive but is also economically meaningful,” explained Köhler.
“It implied that 33% of Ters recipients would have lost their jobs had they not received the subsidy, and this translates into at least two million jobs being saved over the period.
“This result suggests that the extent of job loss at the pandemic’s onset would have been much more severe without the policy.”
The research also found that job-saving effects favoured higher-wage workers.
“While effects were large and positive regardless of the size of a recipient’s wage or subsidy in absolute or relative terms, the effects were marginally regressively distributed. This was not necessarily good news from an income inequality perspective, considering that job loss at the pandemic’s onset was already concentrated on lower-wage workers in South Africa.”
However, the other side of the coin is that their findings suggest that 67% of recipients during this period were “inframarginal” – that is, they would have remained employed anyway,” said Köhler.
Cape Times