Kudos for graduates subvention
economy. Transfer payments add on to the recurrent expenditures of government. In simple terms, these are recurring expenditures or the money that the government needs to spend every year to fulfil those obligations. An increase in recurring expenditures reduces the amount available to capital projects, which are critical in catalysing private sector-led growth. Furthermore, studies have shown that government transfer payments are not an effective tool to improve in the poverty situation of a country as a result of crowding out. Crowding out simply means to push, move, or force (something or someone) out of a place or situation by filling its space.
The public money tends to push out private money that would come into the economy and lead growth through private funds, which is a more sustainable proposition. This occurs because an increase in government spending also has an effect of increasing interest rates, making it expensive for users of capital to borrow money. Also, transfer payments tend to induce a moral hazard on the population, as those who receive the payment may chose not to engage in meaningful economic activity as a result of the payment. Why work when you are getting money without rendering any service? It is for this reason that all governments must endeavour to design their transfer programmes in a way that it will reduce the moral hazard and crowding out. This is the primary reason I saw it befitting to weigh in on the issue and discuss the merits and demerits of the subvention to 4 000 graduates.
Subvention of 4 000 unemployed graduates, crowding out
A well designed public delivery of a transfer payment should ensure that the moral hazard and crowding out effect are minimised as much as possible. I give the designers of the proposed UNDP and government unemployment transfer project or the subvention a 100 per cent. The programme is designed in a way that it involves both the private sector and government. The design ensures that public funds and private funds complement each other instead of crowding out the other. Government funds or funding through the international civil service will come into the play where the private sector fails to raise the stipend to be paid to the interns. The complementarity in the funding landscape will truly invigorate growth and transform our economy. This, to me, marks an economy venturing into new territory. This is the radical thinking that we need to transform the economy and create a workforce to be reckoned with.
The subvention, moral hazard
The fact that the programme is purely designed to get the youth into industry and also cultivate entrepreneurship, again, I give the planners a 101 per cent for the design of the programme. This eliminates moral hazard on the youth, as they only get to benefit from the programme if they want to be in productive employment. The youth will also benefit from the broad-based unemployment reduction component of the project through skills building and incubation and cultivation of entrepreneurs. This, to me, reveals that the project was built on the understanding that this is an unemployment problem, which requires our concerted efforts as a country and we need to ensure that we leave no one behind. I love the fact that the project targets all youth, even non-graduates through the skills improvement programme. This is indeed sustainable and inclusive growth that the country needs.
Radical thought
We need to now ride this wave of radical thought as a country and embrace it. Changing the status quo ought to always be outside the bounds of normal thinking. It requires disruptive innovation, so we build better. We need a forward thinking policy stance that will ensure that the skills developed through this project are enhanced to take advantage of economic opportunities. We need to improve our start-up financing modalities and build efficiencies so we do indeed have private sector led growth.