A better life closer to opportunities
RESEARCH from the World Inequality Lab revealed that South Africa was one of the world’s most unequal countries, with 10% of earners capturing 66% of the national income, where the top one percent in 1987 held 8.8% of SA’s wealth and by 2012 had enlarged their share to 19.2%.
SA’s low labour productivity levels have been bemoaned by both business and local government’s Western Cape Investment and Trade and Promotion Agency (Wesgro), with reference to labour law rigidity being an impediment to faster economic growth. Cape Town is especially referred to in business circles as “Slaapstad”, due to its low levels of productivity and a CBD that goes quiet after 5pm, except for a small area in Long Street and surrounds.
Labour productivity surveys, however, don’t take into account labour fatigue, due to long hours at work and a significant commute between home and work. The poorest Capetonians live furthest from economic opportunities and the many hours spent away from home also undermine the ability of workers to improve themselves through further study.
Studies on urban design revealed its profound impact on the foundation of economic growth, poverty reduction (job creation), the reduction of inequalities and the creation of safe, financially and environmentally sustainable and efficient towns and cities.
The Annual Global Traffic index, however, rated Cape Town’s roads, once more, as being the most congested in SA, for the most part due to historical injustices experienced in Cape Town during apartheid, specifically spacial planning. Many town planners referred to this as urban sprawl on steroids.
The business cost of urban sprawl has been explained in Robert Townsend’s book, Up the Organisation: How to Stop the Organisation from Stifling People and Strangling Profits, in which he cited increasing distances between satellite offices and head office as a cost (the further that inventory has to travel, the higher the cost of doing business).
Urban researcher Barbara Southworth stated that international studies on urban sprawl proved that the creation of more compact cities could save, conservatively, between 35% to more than 45% of a city’s operating budget. The reversal of apartheid spatial planning could thus release billions of rands per annum for social development interventions into the Cape Flats.
A number of academics and researchers have drawn attention to the fact that compact cities could reduce levels of inequality.
Senior researcher at the University of Johannesburg’s Centre of Social Development in Africa, Lauren Graham, highlighted the inter-generational transmission of poverty as being a hurdle to reducing high levels of poverty. She emphasised that:
“Young people who are born to parents who live in poverty have every chance of falling into poverty themselves.”
“We need to look at methods to interrupt the transmission of poverty. Suggestions of extending the child support grant to a youth grant will not solve the problem on its own.”
“A lot of it is rooted in the apartheid policy of the past, relating to exclusion from partaking in the economy.”
Andrew Fleming (Urban researcher) explained in the Global Urbanist that an important intervention to integrate historically disadvantaged Capetonians back into the economy and social fabric of society was to create housing opportunities in the inner city (CBD and a 10km radius around it).
Dr Johan Fourie, senior economics lecturer at Stellenbosch University, linked the distances that Capetonians had to travel to and from work to high poverty levels and: “One of the ways to combat poverty in South Africa is to bring the poor, who live on the outskirts of cities, closer to the city centre.”
Research undertaken by Professor Raj Chetty – editor of the Journal of Public Economics and director of the Lab for Economic Applications and Policy (Harvard University), and of the National Bureau of Economic Research – which combined empirical evidence and theories on taxation, unemployment, education and upward economic mobility, has been widely cited in both the media and US Congressional testimony, resulting in Chetty being awarded the prestigious Macarthur Genius Fellowship in 2012.
Chetty and Professor Nathaniel Hendren of Harvard University, in their Equality of Opportunity project, used “big data” to develop new solutions to the mobility of low-income households, with the previous phase of the project having presented “statistics on how upward mobility (escaping poverty) varied across areas ... and over time”. The project asked the question: “How can we improve economic opportunities for low-income children?”
Graphic analysis by Chetty revealed the cost-effectiveness of moving to opportunity (MTO) (affluent/ upmarket areas) and an increase in income, available to children aged under nine, of 31%.
The five factors associated with strong upward mobility were:
Less segregation by income and race.
Lower levels of income inequality. Better schools. Lower rates of violent crime. A larger share of two-parent households.
Analysis of the MTO highlighted that Manhattan scored the lowest, compared to other US cities, due to a bias towards mass housing developments on the periphery of its CBD (as was being promoted in Cape Town).
Better results in other US cities were seen as being due to affordable/ fair housing units, available within well-located, mixed-income apartment blocks in upmarket areas.
In fact, if mixed-income developments in central Manhattan had been solely considered, the city would have performed the best.
The study, “Effects of Exposure to Better Neighbourhoods on Children”, by Raj Chetty, Nathaniel Hendren and Lawrence F Katz (Harvard University, 2015) concluded that “offering low-income families housing vouchers and assistance in moving to lower-poverty neighbourhoods has substantial benefits for the families themselves and for taxpayers ... our findings suggest that efforts to integrate disadvantaged families into mixed-income communities are likely to reduce the persistence of poverty across generations.”
A 2016 study by Chetty and Hendren for the US National Bureau of Economic Research, on the “Impacts of Neighbourhoods on Intergenerational Mobility In: Childhood Exposure Effects” concluded that “children’s opportunities for economic mobility are shaped by the neighbourhoods in which they grow up. Neighbourhoods affect children’s long-term outcomes through childhood exposure effects: Every extra year a child spends growing up in an area where permanent residents’ outcomes (income, college attendance, marriage, teenage employment, and lower teenage pregnancy) are higher, increases his or her earnings ...
“These results motivate placebased approaches to improving economic mobility, such as making investments to improve opportunity in areas that currently have low levels of mobility or helping families move to higher opportunity areas.”
The Equality of Opportunity programme reveals that the creation and promotion of affordable social housing for the poor and working class within the inner city and along the M4 (from central Cape Town to the southern suburbs) will have benefits for taxpayers – and ratepayers – as people stimulate economic activity and economic growth.
Concurrent interventions that promote small and micro businesses on the Cape Flats and the outlying areas of Cape Town should also be implemented.
Inevitably, the reduction of poverty and inequality would increase the tax/rates base and reduce taxpayers’ tax burden.