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In: Economics

3. (a) Below is an extract from the Skills Development Levy Act No. 46 of 2016:...

3. (a) Below is an extract from the Skills Development Levy Act No. 46 of 2016: “An Act to provide for the imposition, payment and collection of a skills development levy at the rate of 0.5 percent of gross emoluments; and to provide for matters connected with, or incidental to, the foregoing…” The levy is payable by employers. The levy will be collected by the Zambia Revenue Authority (ZRA) and paid into the Technical Education Vocational and Entrepreneurship Training Authority (TEVETA) Fund. Using an appropriate economic model, analyse the likely long-run effects of this Act on skills development, real wages and employment levels.

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Expert Solution

What is decribed here is a classic example of welfare to works program. To analyse the likely long-run effects of this Act on skill development, real wages, and employement levels, we must first understand the aim with which this program was created. The levy of 0.5% will be collected by Zambia Revenue Authority (ZRA) and paid into the Technical Education Vocational and Entrepreneurship Training Authority (TEVETA). This money will then be utilized for skill development of the people of Zambia so that they can gain meaningful employment.

This welfare activity reduces the government expenditure on training and development and passes on the burden to the employers. This model's aim is to increase the income of its participants.

Now coming to its long-term impact. This act will make sure that the population of Zambia is more skilled and has vocational training which will further help in getting jobs. A simultaneous activity that the government must also do is to create jobs to absorb this freshly minted skilled workforce. This will increase the employment levels in the economy and also increase the real wages of the population of Zambia since skilled workforce must command better pay.

Rahul Sunny answered 8 months ago
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