Article title: Wage subsidies and COVID-19: The distribution and dynamics of South Africa’s TERS policy
Authors: Köhler, T., & Hill, R.
Journal: Development Southern Africa
Bibliometrics: Volume 39, Number 5, pages 689-721
DOI: https://doi.org/10.1080/0376835X.2022.2057927
This article has been corrected to clarify the description of the TERS policy. The following changes have been made:
The last paragraph of Section ‘2. Overview of the Temporary Employer-Employee Relief Scheme’ has been changed to:
Preliminary TERS benefit amounts were calculated using equation (1), but the calculation of final benefit amounts was more complex, being subject to additional clauses specified in the consolidated directive. Overall, the policy had no explicit minimum benefit amount, but rather sought to ensure minimum take-home pay for eligible workers equivalent to the national minimum wage of R3500 and a maximum take-home pay equivalent to their usual wage.4 This was done by making TERS benefits a function of the following: a worker’s usual wage as indicated in equation (1); a minimum and maximum IRR of 38% and 60%, respectively; a maximum salary threshold of R17712 per month for calculation purposes and hence a maximum TERS benefit of approximately R6730 per month; any employer contributions to the worker; and the above minimum and maximum take-home pay limits. As a simple illustration, the implications of the benefit formula for a scenario with zero employer wage contributions are presented in Figure 2. Because of the progressive sliding-scale IRR and upper and lower benefit thresholds, lower-wage workers receive proportionally greater benefits despite higher-wage workers receiving more in absolute terms. For example, a worker earning R9125 per month is entitled to an IRR of 43%, resulting in a monthly benefit of nearly R3900. A higher-wage worker earning R16730 per month is entitled to an IRR of 38%, resulting in a monthly benefit of nearly R6420. A low-wage worker earning about R3040 per month is entitled to an IRR of just under 51%, resulting in a monthly benefit of nearly R1544. Assuming that the employer is unable to contribute to the wage of the worker, because the calculated benefit in this latter case falls below the stipulated minimum benefit of R3500, the worker will receive a benefit R3500 – a benefit which exceeds their usual wage. If the employer instead, for example, were able to contribute R1000 towards the workers’ wage, the TERS benefit would be adjusted to be R2500 to ensure a minimum take-home pay of R3500.
Footnote 4 has been corrected to:
The relevant clauses for the calculation of TERS benefits were clauses 3.4, 3.5, 3.6, and 5.3. Importantly, the TERS could only cover the cost of salaries and no other firm expense.
The following note has been added to the caption of Figure 2:
[2] For illustration purposes, calculations of TERS benefit values here assume zero employer wage contributions.
The following footnote has been added to the first paragraph of Section ‘3.3 Methodology’:
Note, however, that due to a lack of data on employer contributions to worker wages, our benefit estimates assume zero employer wage contributions. This approach necessarily overestimates total benefit figures, however, given the incentive-compatibility structure of the programme, we believe firms would be incentivised to contribute as little as possible towards worker wages, thus making this overestimation minor. We do emphasise that the reader should bear this in mind when considering these results, however.
Clarification of the assumption of zero employer wage contributions has been added to the third paragraph of ‘4.1. Aggregate trends in receipt’, the last paragraph of ‘4.2 Between-group trends in receipt’, the notes to Table 4 and the notes to Figure A2.