SA+inequalities+persist+despite+growth,+Makgetla,+Business+Day

Business Day, Johannesburg, 02 June 2006
=SA’s glaring inequalities persist in spite of growth=


 * Neva Makgetla**

ASGI-SA has highlighted the need for shared growth, overcoming SA’s economic history of divisions and inequality.

Debates on policies to achieve this reflect differing assessments of progress in addressing poverty and inequality since 1994.

These assessments are clouded because researchers have framed the question in different ways. They focus variously on:


 * How many people live below the poverty line.
 * What has happened to the overall distribution of income.
 * Whether racial inequalities have been reduced.

In the event, the data suggest that overall income inequalities have improved at best only slightly in the past four years, as growth has inched toward 4% a year. As a result, SA remains among the most inequitable societies in the world. Still, the number of households living in poverty has declined somewhat in recent years, mostly due to expanded social grants.

International organisations typically define the poverty line, more or less arbitrarily, as one or two US dollars per day per person. From this standpoint, a poverty line of $2 a day would today translate into a household poverty line of about R1500 a month for a family of four. According to the Labour Force Survey, between 2002 and 2005, there was no significant change in the share of employed people earning a wage of less than R1500 a month in real terms — about 50%. About 6-million workers were paid over the poverty line last year, but 5,5-million earned less.

Not surprisingly, given the high rate of unemployment, the picture is far bleaker if we look at household expenditure. Household expenditure reflects income from all sources, including welfare grants, not just profits or wages. It does not, however, measure the value of free basic services, for instance of education, health, water or electricity.

In 2004 — the latest data available — 70% of all households lived on less than $2 per person per day. Half of all households spent under R800 a month, or just over half the poverty line. Still, 2004 showed a very modest improvement compared with 2002. In 2002, 75% of households lived on less than the poverty line, and 60% of households spent less than R800 a month.

The available data suggest that the current growth spurt has done virtually nothing to support greater equality in earned income. In 2005, again using Labour Force Survey data, the poorest 50% of employed people got about 12% of income. In contrast, the richest 5% enjoyed 42%. These figures remained virtually unchanged from 2002.

The data do not permit reliable estimates of income distribution between households. Obviously, given high unemployment, the figures would be more inequitable than for earned income. Still, a slight drop in unemployment and the extension of social grants may have helped.

Unemployment fell very slightly between 2002 and last year — from 42% to 38%, using the broad definition that includes everyone who wants paid work but does not have a job.

Social grants probably played a stronger role in alleviating poverty. In 2002, about 25% of households living under the poverty line subsisted mainly on social grants, with 15% surviving on remittances from relatives and the rest from earned income.

In contrast, in 2004, 30% of those living under the poverty line said social grants were their main source of income, with more or less the same share living on remittances. The percentage reporting that most of their income came from earnings had declined, underscoring the inadequacies of job creation despite growth.

While overall inequalities have remained little changed, there has been a substantial expansion in the share of black people in the high-income group. In 1996, only about one in seven of the richest 10% of income earners was African. In 2005, the African share had almost doubled to just under a third.

Most of the increase in the African share in the high-income group resulted from the promotion of Africans in the public sector, which also increased its share in the high-income group overall. The share of Africans in the public sector in the top 10% of income earners rose from a third to half, while the share of the public sector as a whole in the best-paid 10% rose from 29% to 33%.


 * Makgetla is a Congress of South African Trade Unions economist.


 * From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A209704**

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