2005-11-05,+Quibbling+over+stats+blurs+focus+on+plight+of+poor

Business Day, Johannesburg, 04 November 2005
= **Quibbling over stats blurs focus on plight of poor** =

//Neva Makgetla//
STATISTICS can provide an endless source of occupation for any good economist. If you disagree with someone’s conclusions, you rarely have to debate broader principles. You just attack their methodology, come up with alternative figures, and feel free to ignore their concerns.

This kind of discourse has become particularly prominent in SA over the past six months or so — although rarely with as much media fanfare as Mike Schussler’s recent study on employment and growth.

The reason is fairly obvious. The official data show steady — if rather slow — growth over the past five years, but only disappointing job creation. By extension, growth is not doing much to bring about greater equity or social integration.

To use the language of the 1980s, growth has not “trickled down” adequately to the poor.

There are three possible interpretations of this dichotomy.

The first interpretation argues that inequitable growth has a long tradition in SA, and the current expansion is no different.

The second seeks to prove the data are simply wrong.

The third takes a compromise position, agreeing that although growth is not doing enough to address inequalities and unemployment, the poor are nonetheless enjoying some benefits.

Schussler’s study explicitly takes the second path, while agreeing that job creation must be accelerated to ensure broader benefits from growth. It essentially argues that car and house sales as well as tax revenues, are up, so the official data must underestimate growth in both the economy and employment. It then looks at net Unemployment Insurance Fund (UIF) registrations (excluding domestic work) to “prove” the point, finding about 360000 net new jobs registered in the past year.

There are problems with the dependence on UIF data, however. First, it is difficult to tell if new registrations genuinely reflect new jobs, as opposed to more stringent registration procedures. Last year, 74% of private formal workers told the labour force survey that they were registered with the UIF, up from 67% in 2002.

In addition, data collection at the UIF is creaky, so the deregistration of terminated workers can take months. Besides, it is not clear that all employers bother to deregister workers formally, especially if they go out of business.

In any case, we still need to understand why the UIF findings differ so markedly from the government’s official labour force survey and quarterly employment statistics.

The former, which surveys about 30000 households on a biannual basis, finds that formal employment remained virtually unchanged in the year to March this year. The latter, which surveys a similar number of formal businesses, finds a net loss of 20000 jobs between December last year and June this year, in part because of seasonal job losses following Christmas.

Both studies suggest that employment has grown far more slowly than the gross domestic product (GDP) in the past year, with a marked slowdown in employment creation compared with 2002 and 2003. The official data make sense if we take into account the economic realities.

On the one hand, the growth spurt arises essentially out of the international commodity boom plus more relaxed fiscal and monetary policies. Lower nominal interest rates in themselves largely explain the car and housing boom.

On the other hand, growth remains largely focused on capital-intensive industries — mining and metals, heavy chemicals, telecommunications and automotive — which do not create jobs on a substantial scale.

In these circumstances, the bulk of returns from growth still go to those already entrenched at the top. Ordinary workers, the unemployed and the marginalised in the former homeland areas continue to get, at best, crumbs from the table.

The boom for the well-off combined with continued depression at the bottom has already fuelled widespread protests, a bitter strike wave and persistent crime.

Experience shows that massively inequitable countries — and SA ranks among the most unequal in the world — rarely experience sustained growth. In particular, if commodity prices retreat, the current expansion could come to an abrupt end.

That is why the emphasis on shared growth in government’s current policy work is so welcome. The risk in quibbling over the data and emphasising the positive is that we lose sight of the need for a massive improvement in conditions for the poor, which in turn requires a qualitative increase in employment creation.

‖Makgetla is an economist with the Congress of South African Trade Unions.

From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A109145