Four million poor youth could benefit from grant

THERE are many reasons inequality and poverty are exceptionally high in SA. One reason is our astonishingly high unemployment. According to official statistics more than 8-million South Africans are jobless.

Unemployment is especially high for those younger than 35. Many of the unemployed have never had a job. Long-term unemployment means extreme poverty and misery for millions.

In the Eastern Cape, for example, more than 1-million young people live in households in which nobody has ever worked. The likelihood that they will be able to get a job is low indeed.

For the poor, modest relief is available to the young, the old and those with disabilities. There are 12.3-million poor children currently receiving grants from the state of R350 per month.

A further 5-million people receive old age pensions, disability or foster care grants. Yet, for the unemployed aged 19-60, the only state support is occasional short-term employment in public works schemes.

In 2002 the Taylor Committee, which was appointed by government to look at social security, recommended a basic income grant of R100 a month for all South Africans. The proposal enjoyed support from the churches, unions, SACP and DA.

Interestingly, similar proposals are under review in several other countries today. Finland is currently considering a universal income grant. Switzerland, however, overwhelmingly rejected such a grant in a recent referendum.

The Taylor Committee argued that it is more efficient to make a grant available to everyone than to target only the needy via a means test. The grant could be recovered in taxes from those who receive but do not need it, it argued.

In the event, our government chose a targeted approach, introducing child grants for households earning below a prescribed threshold. Over time, the qualifying age was raised to 18 and the number of child grants increased rapidly.

The current budget sets aside R167bn for social protection expenditure, 11% of total government spending — R57bn is for child grants and foster care.

The R100 per month grant recommended by the Taylor Committee seems very low today. But there is evidence that child grants reduce acute poverty significantly. Extending the same benefit to everyone in poor families would provide additional relief.

If the state were to pay R350 per month to all 55-million South Africans as a universal grant, this would cost R231bn annually — more than 15% of current government spending. But it would not be given to the 17.3-million South Africans already receiving an existing state grant. And if an income threshold was set above which the grant must be repaid (or not received in the first place), this could apply to the 6.6-million individuals who currently file tax returns, and their dependants.

Then the number of South Africans qualifying for this new grant would fall to perhaps 27-million. However, even this would still cost government an unaffordable R113bn annually.

But what if, for now, the qualifying age for the child grant was instead extended to 25? This would embrace the age group that has the most acute unemployment and for whom the need for further education and training is most urgent. About 4-million young South Africans would qualify for this grant, costing government R17bn (1.2% of current spending) annually.

Funding such a grant would have to compete with demands for national healthcare, free tertiary education, above-inflation salary increases for public servants, presidential jets, and the seemingly never-ending demands of loss-making parastatals.

Resolving this would require Treasury’s critics to realise that trade-offs have to be made. And to agree on what is the country’s greatest need.

Of course, if somehow the economy and the tax base started growing rapidly, funding such demands would become much easier. In the case of the basic income grant this is doubly so. A growing economy that creates jobs both raises tax revenues and reduces the number of people requiring the grant in the first place. Keeton is with the economics department at Rhodes University.

■