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n South African Journal of Labour Relations - Reviewing the economics of the skills development levy : a political ?

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Abstract

The "rationale" is the fundamental economic reasons for skills development levies, such as that currently employed in South Africa, are well established. The history behind the adoption of the Skills Development Levies Act makes it clear that these reasons were understood and the underlying theory was applied. However, it can also clearly be construed that it was the intention of the Act that companies should bear the incidence of the levy. This does not fit in with international experience and economic theory, however. Models of taxation, as well as research, suggest that workers tend to bear the burden of a levy scheme through lower real wages and employment levels. Furthermore, there is scope for possible inefficiencies in the system that may lead to workers bearing more of the burden than human capital theory would suggest should be the case. The levy-grant system, although not opposed, is therefore questioned in terms of its political basis and justifications. The conclusion that policymakers may have understood the basis behind a levy, but misconstrued its incidence, has various implications for efficiency in the labour market.

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/content/labour/26/1/EJC59554
2002-01-01
2016-12-09
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