The Presidential Youth Employment Initiative – Basic Education Employment Initiative (PYEI-BEEI), launched in 2020, has been shown to have economic benefits through an indirect influence on non-programme employment and wages.

This was according to a new study, 'Stimulus effects of a large public employment programme', funded by Agence Française de Développement (AFD) and the European Commission through the EU-AFD Research Facility on Inequalities, and undertaken by the University of Cape Town's Southern Africa Labour and Development Research Unit.

The study was commissioned by the country’s Presidency and investigated the domestic factor income effects of the PYEI-BEEI.

Researchers characterised the spending and factor income effects of the PYEI-BEEI programme and matched securely anonymised participant IDs with anonymised weekly individual-level sales data from a large retailer and estimated the treatment effect on participant spending at the retailer.

“The researchers found a sharp increase in spending of 15.4% explained by increasing consumption expenditure. They also found that this direct effect on consumption and spending was sustained for the duration of the PYEI-BEEI, and then decreased to about 4% in the months after the programme. The researchers extrapolated the effects of the increase in retailer sales on domestic factor incomes and suggested that this phenomenon implied benefits to value added, job creation and wages in the local areas in addition to the actual payments of the PYEI-BEEI programme,” the study found.

It is estimated that the programme will create 1 800 more jobs a month and increase the income of local communities by about R13.3-million.

The study concludes that domestic factor income effects may be important in evaluating the economic efficiency of government spending programmes, and may help reconcile some of the perceived trade-offs in public objectives between poverty reduction and private sector jobs.

It also suggests that the sales to domestic factor income conversion estimated for the PYEI-BEEI programme implies that other public spending, such as social grants, may have similar initial stimulus effects.