Neil Rankin

Position: Associate Professor, Department of Economics

Institution: Stellenbosch University

Neil Rankin is an applied micro-economist working on labour market and firm related issues, including labour demand, in South Africa. Prior to joining Stellenbosch University in 2013 he was the founding Director of the African Micro-Economic Research Unit (AMERU) at the University of the Witwatersrand. He has also worked as a research officer for the Centre for the Study of African Economies at the University of Oxford whilst completing his doctorate at that university.

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Editor's Corner

How the TERS saved jobs

In this edition of Econ3x3, we publish the results of the first detailed study on how the Temporary Employer-Employee Relief Scheme (TERS) helped to retain jobs at the onset of the Covid-19 pandemic.

In previous research, Tim Kohler, Haroon Bhorat and Robert Hill found a strong correlation between the TERS and job retention. Now they have established causality, and have also drilled down deeper into its effects. Essentially, they ask two questions: did the TERS save jobs, and who benefitted the most.

Their findings are critical for policy. The answer to the first question is that TERS increased the likelihood of retaining a job by nearly 16 percentage points. In numbers, this means that more than two million jobs were saved. In the working paper on which this article is based (produced with support by UNU-WIDER), the authors used a Difference-in-Difference analysis to establish a direct causal effect between the TERS and job retention. This model “compares the job-retention probabilities of TERS-eligible and ineligible employees from before the policy was introduced with afterwards.”

Through this, the authors establish that TERS was the cause of job retention – particularly in the early phase of the pandemic and lockdown. The effect of TERS was not only positive, they write, but “economically meaningful”.

The second question is more complex. Subsidy amounts varied according to a worker’s wage. They did not fall below the minimum wage of R3500 a month. The maximum amount was R6730 a month. Because of this variation, they find that the effects of TERS were slightly regressive – in other words, higher-paid workers benefitted slightly more than lower-paid workers.

It should also be borne in mind that TERS-eligible workers were from the formal sector and were those who had registered for the Unemployment Insurance Fund (UIF).

The other question they examine is who would have lost jobs without TERS. To this, they answer that 33% of the workers who benefitted would have lost their jobs had it not been for the TERS. The other side of this is that 67% of workers would have retained their jobs even without TERS but nonetheless the subsidy gave income support to workers at a time of great economic disruption.

The slightly regressive outcomes were a result of the policy’s initial preference for rapid disbursement over accurate targeting,

The key policy lessons are that such wage-subsidy interventions can save jobs in a time of crisis. But careful targeting of the subsidy is important. More accurate pin-pointing could make such a scheme an even more effective labour-market intervention.

We have maintained a focus on how active labour-market interventions could work. In the last edition of Econ3x3, we looked at how social grants can be more than simple income-relief tools. With the right design, and combined with job-search assistance programmes, they can help young people into the labour market.

The authors, Kate Orkin, Ingrid Woolard, Maya Goldman, and Murray Leibbrandt, cite research showing how cash grants encourage recipients or their household members to more actively look for jobs.

If grants – principally the Social Relief of Distress grants also introduced during the pandemic - are combined with job-search assistance programmes, the evidence is they could actually increase employment. So rather than being seen as a substitute for jobs, social grants, designed in conjunction with programmes that help reduce the barriers that job-seekers face, could enhance employment prospects.

Pippa Green, May 29, 2023

Working Papers from the REDI3x3 project are available HERE

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A compilation of the research findings and policy proposals of the REDI3x3 Project has been collected in the book, A MEASURE OF OUR ILLS - and how we might fix them. Access the book here: https://bit.ly/REDI3x3book

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Articles

How the TERS saved jobs

Working Papers from the REDI3x3 project are available HERE

READ, WRITE & REASON

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