The plight of SA’s work­ing poor

Finweek English Edition - - INSIDE - BY MIKE RO­GAN AND JOHN REYNOLDS

In the wake of the fi­nan­cial cri­sis and the en­su­ing pe­riod of aus­ter­ity, there has been a re­newed in­ter­est in the work i ng poor i n de ve l oped coun­tries, in­clud­ing the US and the UK. In the US in par­tic­u­lar there are con­cerns about the ris­ing num­ber of peo­ple who have two or three dif­fer­ent jobs but who still can­not make ends meet.

In South Africa, t he re­lease of the latest un­em­ploy­ment f ig­ures is a re­minder that the coun­try has a dif­fer­ent prob­lem. Un­em­ploy­ment seems to have been one of the big­gest chal­lenges since the f irst demo­cratic elec­tions in 1994, with roughly 25% of the labour force con­sis­tently be­ing un­em­ployed.

This num­ber is based on the most con­ser­va­tive def­i­ni­tion of un­em­ploy­ment. Given this rate, it is per­haps not sur­pris­ing that SA has been less con­cerned about poverty among the em­ployed.

But the “triple chal­lenge” of poverty, in­equal­ity and un­em­ploy­ment re­quires that we con­sider how the labour mar­ket is linked with the goal of poverty re­duc­tion. In other words, is poverty sim­ply a prob­lem of un­em­ploy­ment in SA or are em­ployed peo­ple also liv­ing be­low the poverty line? Per­haps just as im­por­tantly, is the sit­u­a­tion of work­ing South Africans im­prov­ing with re­gard to poverty?

Although not of­ten recog­nised, SA has both an un­em­ploy­ment prob­lem and a work­ing poverty prob­lem. That roughly one-f ifth of South African work­ers are poor and that half of all poor South Africans live with at least one em­ployed per­son would sug­gest that the con­tri­bu­tion of the labour mar­ket to hu­man de­vel­op­ment is not reach­ing its po­ten­tial.

THE NUM­BERS ARE SHOCK­ING

Since 2006, more than one-f ifth of SA’s to­tal work­force has been liv­ing in house­holds that are not able to meet their ba­sic min­i­mum food and non­food re­quire­ments. This is ac­cord­ing to Sta­tis­tics SA’s of­fi­cial up­per-bound poverty line.

This was a slight im­prove­ment on the 2004 f ig­ures, where about 29% of all work­ers – for­mal and in­for­mal – were “poor”, ac­cord­ing to our cal­cu­la­tions from the Gen­eral House­hold Sur­veys.

The bad news is that not much progress has been made since 2006. By 2012, work­ing poverty de­creased fur­ther to 21% (own cal­cu­la­tions), but the de­crease was not sta­tis­ti­cally sig­nif­i­cant if the sur­vey mar­gin of er­ror is in­cluded.

At the same poverty line, about half of all poor South Africans lived with an em­ployed per­son in 2012. This means that un­em­ploy­ment is the main con­cern for about half of the poor pop­u­la­tion while low earn­ings or the poor qual­ity of work is the con­cern for the other half.

THE IM­PACT OF SO­CIAL GRANTS

So, why has progress to­wards re­duc­ing work­ing poverty not been sus­tained since 2006? There are a num­ber of ways to an­swer this ques­tion, but mea­sur­ing how wages and other in­come sources have con­trib­uted to poverty re­duc­tion is prob­a­bly the most re­veal­ing.

Over­all lev­els of poverty de­creased con­sid­er­ably in the early 2000s as gov­ern­ment ex­panded the so­cial grant sys­tem. The con­tri­bu­tion of so­cial grants to poverty re­duc­tion can be seen in the steep drop – from 60% to 55% – in poverty rates be­tween 2004 and 2006 (own cal­cu­la­tions). Since 2006, poverty rates have con­tin­ued to de­crease but at a slower rate.

So­cial grants were also an im­por­tant part of the de­crease in work­ing poverty in the early 2000s. This ex­plains much of the drop in the work­ing poverty rate be­tween 2004 and 2006. But the rate of so­cial grant ex­pan­sion was not sus­tained over a longer pe­riod and the work­ing poverty rate sta­bilised af­ter 2006.

If we look more specif­i­cally at the rel­a­tive con­tri­bu­tion of grant in­come to the re­duc­tion of work­ing poverty, we find that this rel­a­tive con­tri­bu­tion con­tin­ued to in­crease (or at least did not de­crease) be­tween 2004 and 2012. This means that wages or earn­ings played an in­creas­ingly smaller role in the re­duc­tion of work­ing poverty through­out the 2000s.

Also, in rel­a­tive terms, the in­crease in the im­por­tance of the con­tri­bu­tion of grant in­come to poverty re­duc­tion was ac­tu­ally greater among the work­ing pop­u­la­tion than for the pop­u­la­tion as a whole.

POL­ICY IM­PLI­CA­TIONS

From a pol­icy per­spec­tive, there are a num­ber of im­pli­ca­tions as­so­ci­ated with these find­ings. In terms of labour mar­ket pol­icy specif­i­cally, stud­ies of work­ing poverty of­ten con­trib­ute, at least tan­gen­tially, to de­bates on labour mar­ket f lex­i­bil­ity.

While t he re­search dis­cussed here can­not con­trib­ute to this de­bate di­rectly, it is worth not­ing that work­ing poverty in SA has per­sisted over a pe­riod which saw:

both high and low lev­els of eco­nomic growth;

high and per­sis­tent level of un­em­ploy­ment;

the on­set of and (par­tial) re­cov­ery from a ma­jor fi­nan­cial cri­sis;

the in­tro­duc­tion of pro­tec­tive labour mar­ket leg­is­la­tion; and

the ex­pan­sion of the so­cial grant sys­tem.

The per­sis­tence of work­ing poverty and un­em­ploy­ment amid the in­ter­play of these po­ten­tial driv­ers and me­di­a­tors of low earn­ings per­haps of­fers more ques­tions than an­swers as to the scle­rotic na­ture of SA’s labour mar­ket. The key ques­tion is where the re­spon­si­bil­ity l ies for the roughly one-f ifth of the coun­try’s work­force that re­sides in poor house­holds.

Pri­vate and public em­ploy­ers surely have some level of re­spon­si­bil­ity for en­sur­ing a min­i­mum level of de­cent wages. At the same time, the greater so­cial re­spon­si­bilit y for vul­ner­a­ble work­ers is some­thing that should also be shared more widely.

While we can de­bate the def­i­ni­tion of poverty and the way in which we choose poverty lines, we must be clear that no-one should live be­low, or even near, any of SA’s of­fi­cial na­tional poverty lines.

Work­ers at a cloth­ing fac­tory in the in­dus­trial town of New­cas­tle, south­east of Johannesburg.

Work­ers fold pa­per bags in Soweto.

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