Learn to live with it

The rich get richer at a faster rate than the poor

Finweek English Edition - - Economic trends & analysis - GRETA STEYN

WHEN THE ANC came to power in 1994 its fo­cus fell firmly on the ex­tremes of in­equal­ity and poverty in the coun­try. Around 13 years af­ter the ad­vent of democ­racy – and in the midst of the long­est post-war eco­nomic boom in South Africa’s his­tory – the ques­tion is whether progress is be­ing made in deal­ing with those cru­cial is­sues.

The prob­lem in an­swer­ing ques­tions con­cern­ing poverty and in­equal­ity is that there aren’t any up-to-date of­fi­cial fig­ures; and those fig­ures that do ex­ist are sus­pect. The latest of­fi­cial data from Sta­tis­tics SA stops at 2000 and is based on the In­come & Ex­pen­di­ture Sur­veys (IES) of 1995 and 2000. The com­par­i­son be­tween the two sur­veys shows that poverty was worse in 2000 than in 1995.

Some aca­demics have ques­tioned the use of the IES data, as it’s far out of line with house­hold in­come and ex­pen­di­ture in­for­ma­tion ob­tained from the SA Re­serve Bank’s na­tional ac­counts.

Mean­while, Sta­tis­tics SA has strength­ened the IES but has yet to re­lease its latest find­ings. How­ever, Sta­tis­tics SA has put out a dis­cus­sion doc­u­ment with a sug­gested poverty line for SA set at R322/per­son/month at 2000 prices. That comes to around R430 at 2006 prices. Based on the 2000 IES, that means about 53% of South Africans lived in poverty in 2000.

Crit­ics say that Sta­tis­tics SA has set its poverty line too high and that at that level you can’t tell what’s hap­pen­ing to the poor­est of the poor. How­ever, Sta­tis­tics SA also sug­gests that there should be two thresh­olds be­low and above the poverty line as indicators of ex­treme poverty and of a broader level of house­hold in­come ad­e­quacy. For the thresh­old for ex­treme poverty it sug­gests us­ing the US$2/day mea­sure – which, at 2000 prices, is R162/per capita/month.

It’s im­por­tant to note that the cut-off point to be used is cru­cial. When the cut-off point is too high, it may seem as if fewer peo­ple are liv­ing in poverty when in fact more are liv­ing in ex­treme poverty and more have be­come rel­a­tively well off.

Though the Sta­tis­tics SA pa­per doesn’t say what re­cent trends in poverty have been, there seems to be broad con­sen­sus among economists that poverty wors­ened in the first five years of democ­racy be­fore im­prov­ing mean­ing­fully. Mas­sive Gov­ern­ment spend­ing on so­cial grants is one of the main rea­sons for that im­prove­ment.

Univer­sity of Stel­len­bosch aca­demic Ser­vaas van der Berg and his col­leagues Ronelle Burger, Rulof Burger, Me­gan Louw and Derek Yu have done much work es­ti­mat­ing poverty trends us­ing sources other than Sta­tis­tics SA’s IES. Van der Berg makes use of the SA Ad­ver­tis­ing Re­search Foun­da­tion’s AMPS data, which in­cor­po­rates a range of sur­veys of SA’s adult pop­u­la­tion.

Sta­tis­tics SA has set a poverty line for SA

of R430.

Work­ing on a poverty line of an in­come of R3 000/year, the re­searchers find a mod­er­ate rise in poverty be­tween 1995 and 2000. “By 2004 the in­ci­dence of poverty in SA had fallen sub­stan­tially, with a re­duc­tion of eight per­cent­age points – equiv­a­lent to 3m peo­ple – in the num­ber fall­ing be­low the poverty line,” their pa­per says.

Ad­just­ing the AMPS data for na­tional ac­counts fig­ures yields the same broad trends, al­though ab­so­lute num­bers of peo­ple in poverty dif­fer.

The re­searchers then turn to the ques­tion of in­equal­ity, which has wors­ened since the ad­vent of democ­racy. How­ever, it’s im­por­tant to note that in­equal­ity within the same race group has risen more than that be­tween dif­fer­ent races.

“Within-race in­equal­ity has now fi­nally over­taken the ex­treme lev­els of be­tween-race in­equal­ity en­gi­neered by apartheid pol­icy as the main driver of in­come in­equal­ity in SA,” the re­searchers say. Us­ing AMPS data, they ar­rive at a Gini co­ef­fi­cient of 0,70 in 2004 from 0,678 in 1993. The closer the Gini co­ef­fi­cient is to one, the worse the in­equal­ity.

In­equal­ity has been the fo­cus of much at­ten­tion re­cently, with trade union Sol­i­dar­ity re­leas­ing the find­ings of a study that looked at the wage gap and found the av­er­age CEO earned be­tween 35 and 53 times more than the av­er­age worker. Last year, the De­part­ment of Labour linked the yawn­ing in­come dis­par­i­ties with the rise in pay dis­putes be­tween work­ers and em­ploy­ers. SA has tar­gets for eco­nomic growth and poverty. Should it also have a tar­get for in­equal­ity? Van der Berg thinks not, be­cause the main rea­son for in­equal­ity is the high earn­ings paid to highly skilled peo­ple at the top end. There’s a short­age of skilled peo­ple, which drives up earn­ings. “There’s no in­stru­ment to ad­dress this prob­lem,” he says. It seems we’ll just have to learn to live with a highly un­equal so­ci­ety.

No tar­get for

in­equal­ity. Ser­vaas van

der Berg

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