What has happened to inequality and poverty in post-apartheid South - - PowerPoint PPT Presentation

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What has happened to inequality and poverty in post-apartheid South - - PowerPoint PPT Presentation

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What has happened to inequality and poverty in post-apartheid South Africa Dr Max Price Vice Chancellor University of Cape Town OUTLINE Examine trends post-apartheid (since 1994) Income inequality Overall, by race, by gender

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What has happened to inequality and poverty in post-apartheid South Africa

Dr Max Price Vice Chancellor University of Cape Town

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OUTLINE

Examine trends post-apartheid (since 1994)

  • Income inequality

– Overall, by race, by gender

  • Poverty

– Overall, by race, by gender

  • Composition of income and impact of social

grants

  • Trends in social spending and welfare

– Impact on Asset distribution – Impact on health and education

Some explanations for trends Some options for the future

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Shares of Total Income By Decile

Source: Leibbrandt et al (2010).

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Income Gini Coefficients

Source: Leibbrandt et al (2010).

1993 2000 2008 African 0.54 0.60 0.62 Coloured 0.44 0.53 0.54 Asian/Indian 0.47 0.51 0.61 White 0.43 0.47 0.50 Overall 0.66 0.68 0.70

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Employment Shares by Gender

Source: Posel (2011).

56% of all new jobs filled by women

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Real Monthly Average Earnings by Gender

Source: Posel (2011).

Adjusted constant 29%

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Source: Posel (2011).

Racial and gender breakdown of those in the top earnings decile, 1995 and 2007

2007

White male 30% Indian female 2% Coloured female 5% Indian male 5% Coloured male 6% African male 26% White female 13% African female 13%

1995

Indian female 1% Coloured female 1% White female 12% Indian male 5% Coloured male 3% African male 15% White male 57% African female 6%

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Income Inequality

  • Real GDP growth 1994 to 2009 = 3.5%pa = 68%
  • Income inequality increased – one of highest Gini

Coeff in the world

  • Increase is mainly intra-racial
  • Inter-racial inequality reduced - considerable fall in the

share of Whites among top earners

  • Gender inequality reduced

– More women in employment (but more unemployed) – Average earnings of women increased relative to men – Percent of women in top earnings decile increased from 20% in 1995 to 33% in 2007

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Poverty Indices for a line of R515 per month (US $4 per day)

Source: Woolard et al (2010).

Year P0 P1 1993 0.56 0.32 2000 0.54 0.29 2008 0.54 0.28

Foster-Greer-Thorbecke (FGT) poverty indices: P0 – the poverty headcount ratio P1 - the mean poverty gap

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OUTLINE

Examine trends post-apartheid (since 1994)

  • Income inequality

– Overall, by race, by gender

  • Poverty

– Overall, by race, by gender

  • Composition of income and impact of social

grants

  • Trends in social spending and welfare

– Impact on Asset distribution – Impact on health and education

Some explanations for trends Some options for the future

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Composition of Household Income

Source: Leibbrandt et al (2010).

Govt Govt Labour Mkt Labour Mkt Remittances Capital

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Composition of Household Income - 1993

Source: SALDRU 1993 PSLSD data. Own calculations.

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Unemployment

Increased inequality d/t relative access to jobs and increase in salaries for scarce skills Economic growth not been jobless but less than increase in those in labour force 1995 to 2007:

  • 3.1 million increase in jobs
  • But: 3.6 million increase in those who want

employment but who are unemployed.

  • Although women’s share of employment has

risen, women have also been more vulnerable to unemployment than men.

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Composition of Household Income - 1993

Source: SALDRU 1993 PSLSD data. Own calculations.

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Composition of Household Income - 2008

Source: 2008 NIDS data. Own calculations.

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Growth of Per Capita Social Spending

Source: South African National Treasury and Statistics South Africa. Own Calculations.

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Expansion of Grants to Children

Source: South African Social Security Agency SOCPEN data.

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Main Government Grants

Source: Woolard et al (2010).

Grant Type 2010 value in Rands (and PPP$) per month Value as a % of median monthly per capita income Old Age Pension R1080 (PPP$230) 175 Disability Grant R1080 (PPP$230) 175 Child Support Grant R250 (PPP$53) 40 Foster Care Grant R710 (PPP$150) 115

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Composition of Household Income - 2008

Source: 2008 NIDS data. Own calculations.

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Lorenz Curves 2008

Source: 2008 NIDS data. Own calculations.

.2 .4 .6 .8 1

Cumulative Share of Income

.2 .4 .6 .8 1

Cumulative Share of Population

45° line Disposable income Market income

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Gini Coefficients With and Without Grant Income

Source: Bhorat et al (2011).

1995 2005 With grants Without grants Difference With grants Without grants Difference African 0.56 0.59 0.03 0.61 0.71 0.10 Coloured 0.49 0.52 0.03 0.59 0.64 0.04 Asian/Indian 0.46 0.47 0.01 0.56 0.57 0.01 White 0.44 0.44 0.00 0.51 0.52 0.01 Overall 0.64 0.66 0.02 0.72 0.77 0.05

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Poverty Including and Excluding Grants

Source: Woolard et al (2010).

Including grants Excluding grants Year P(0) P(1) P(0) P(1) 1993 0.56 0.32 0.60 0.40 2000 0.54 0.29 0.57 0.37 2008 0.54 0.28 0.60 0.44

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Distributions Including and Excluding Grants, 2008

Poverty Line: PPP$121/month Source: Woolard et al (2010).

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OUTLINE

Examine trends post-apartheid (since 1994)

  • Income inequality

– Overall, by race, by gender

  • Poverty

– Overall, by race, by gender

  • Composition of income and impact of social

grants

  • Trends in social spending and welfare

– Impact on Asset distribution – Impact on health and education

  • Some explanations for trends
  • Some options for the future
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Access to Public Assets and Services

Source: Bhorat et al (2007) and (2009).

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Average Years of Education by Expenditure Decile

Source: Bhorat et al (2007) and NIDS 2008 data, own calculations.

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2009 Enrolment Rates by Age

Source: Woolard et al (2010).

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Child Mortality Trends

Source: Jamieson et al (2011).

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HIV Prevalence in Children Under 15

Source: Jamieson et al (2011).

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Concentration Curves for Total Social Spending

Source: van der Berg (2009).

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Concentration Ratios

Source: van der Berg (2009).

2000 2006 Pro poor ? School education

  • 0.121
  • 0.128
  • Tertiary education

0.528 0.641

  • All social grants
  • 0.371
  • 0.359
  • Child support
  • 0.247
  • 0.318
  • Disability
  • 0.291
  • 0.288
  • Old-age pension
  • 0.412
  • 0.436
  • Health
  • 0.118
  • 0.137
  • Public clinics
  • 0.177
  • 0.257
  • Public hospitals
  • 0.105
  • 0.103
  • Housing

0.160 0.070

  • Total across services
  • 0.112
  • 0.152
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Kernel Densities of Asset Indices

Source: Bhorat et al (2007) .

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Summary re Inequality

  • Analysis of ‘Asset’ inequality tells a different

story from income inequality. Income Gini has worsened, asset Gini coeffs improved

  • No attempts yet to put a value on assets so

cannot calculate social wage and therefore impact on poverty levels – but highlights danger

  • f ignoring
  • Question: why decreasing asset inequality has

not been translated into decreased income inequality?

– Most should have increased productivity – Yet very low returns to improvements in absolute and relative investment in assets

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OUTLINE

Examine trends post-apartheid (since 1994)

  • Income inequality

– Overall, by race, by gender

  • Poverty

– Overall, by race, by gender

  • Composition of income and impact of social

grants

  • Trends in social spending and welfare

– Impact on Asset distribution – Impact on health and education

  • Some explanations for trends
  • Some options for the future
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Reasons for persistent poverty and inequality

Multi-causal, debated, beyond this paper. Some e.g.

  • Opening economy, global competition and slow

restructuring of industry

  • Strong labour movement, unions in government,

high wages (esp. public sector, sets benchmark)

  • V. progressive labour legislation – perhaps

country not ready (hire and fire)

  • Strong affirmative action policy – impact on

wages and productivity

  • Corruption in public and private sectors
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Reasons for persistent poverty and inequality

  • Low skills, poor education system – low

productivity

  • Health – AIDS and TB, productivity and turnover
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Educational Attainment of 25-59 Year Olds by Birth Cohort

Source: Ardington et al (2011).

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Kernel Densities of Literacy and Numeracy Scores – Grade 8 to 12

Source: Lam et al (2011).

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South Africa’s HDI Indices

Source: United Nations Human Development Reports.

Global HDI rank 1990: 59th 2010: 110th

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CONCLUSIONS 1

  • Income inequality rose, especially within race,

reduced between whites and others

  • Income inequality between men and women

reduced

  • Nature of inequality changing dramatically – due

to social grants

  • Headcount poverty slightly decreased, while

mean poverty gap substantially reduced

  • Asset inequality improved – reflecting pro-poor

social spending

  • Risk!!! Fiscal sustainability of grants and social

spending

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CONCLUSIONS 2

Desperate debates: Nationalisation debate! Wealth tax! Land grabs!

  • Key problem is human resources capability

– Health – NB Education – fix schooling – Post-school system – But … long term

  • Public works and state investment in economy
  • Uncompetitive wages in relation to productivity

– Do social grants aggravate this? – Youth wage subsidy? – Clothing sector deal – Conditional grants (e.g. Brazil) may not be possible

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