What effect did the introduction of the Employment Tax Incentive (ETI) have on youth employment
probabilities in South Africa in the short run? The ETI came into effect on the 1st of January 2014. Its
purpose is to stimulate youth employment levels and ease the challenges that many youth
experience in finding their first jobs. Under the ETI, firms that employ youth are eligible to claim a
deduction from their taxes due, for the portion of their wage bill that is paid to certain groups of
youth employees. We utilize nationally representative Quarterly Labour Force Survey (QLFS) data for
the period from January 2011 to June 2014, and implement a difference-in-differences methodology
at the individual level to identify the effects of the ETI on youth employment probabilities.
Our primary finding is that the ETI did not have any statistically significant and positive effects on
youth employment probabilities. The point estimate from our preferred regression is -0.005 and the
95% confidence interval is from -0.017 to 0.006. We thus obtain a fairly precisely estimated 'zero
effect'. We also find no evidence that the ETI has resulted in an increase in the level of churning in
the labour market for youth. What our results imply is that any decrease in tax revenues that arise
from the ETI are effectively accruing to firms which, collectively, would have employed most of these
youth even in the absence of the ETI. We conclude with a discussion of some of the policy
implications of our findings.