LIMITED SUCCESS
Social grants fail to reduce inequality in the country, says ILO report
WHILE social grants have decreased unemployment in South Africa they have not made much of a dent in inequality, according to the International Labour Organisation (ILO).
The country still remains one of the most unequal in the world despite the government expanding the amount of people who receive grants from 3 million in the late 1990s to 16.4 million.
The ILO released its World Employment Social Outlook report this week, which looks at the changing nature of jobs in 180 countries. It said about 70 percent of incomes for the poorest households in South Africa were from social grants.
“The result is that these means-tested grants have significantly contributed to the reduction of poverty,” the report reads.
“That said, our analysis shows that redistributive policies through benefits have only a small inequality reducing effect (0.02 percent in 2012).
“These results are similar to other studies that conclude that the social pension has not reduced inequality and that the child support grant has had a modest impact.”
This year the government will spend R155.3 billion on social grants. While the system has come under fire for creating a dependency problem on the state, the government believes the system is working within its limited capabilities.
The state has argued that while it believes market-based employment is the best way to deal with the country’s soaring unemployment and poverty levels, the problem is too big for the market to deal with alone.
Unemployment rate
The ILO says a key problem is that despite high unemployment rates, there is very limited social protection for unemployed working-age adults.
“The contributory unemployment insurance system covers only 45 percent of the labour force, excluding those who have been unable to make contributions.
“Social assistance programmes are reserved for children and the elderly,” the report reads.
“The limited success of social transfer mechanisms in reducing poverty and inequality reflects in part the dualism in the labour market due to a capital-intensive pattern of industrialisation.
“This has created a formal economy which has high productivity, relatively high collectively bargained wages, social security and other benefits. On the other hand, there exists an informal sector with low productivity, low wages, fewer benefits and not much opportunity for mobility,” the report says.
The 162-page report finds that labour income inequality has declined in the majority of central and eastern Europe, emerging and developing economies.
The exceptions are South Africa, the Czech Republic, Latvia, Lithuania, Mexico and Slovenia.