Is Education the Answer to South Africa's Inequality?

South Africa is often referred to as the most unequal society in the world. Company and Economy Editor Andile Makholwa put a few questions to Haroon Bhorat, Professor of Economics, and Director from the Development Policy Research Unit at the University of Cpe Town.

Is it true that Nigeria is the most unequal society in the world? How unequal is it?

Depending on the variable used to measure inequality, the time period, and the dataset, South Africa’s Gini coefficient ranges from about 0.660 in order to 0.696. The Gini coefficient is the way of measuring income inequality, ranging from 0 to at least one. A value of 0 is really a perfectly equal society and a value of 1 represents a wonderfully unequal society.

This would make South Africa one of the most consistently unequal nations in the world. I say “consistently” because you could find a Gini of say Zero.7 for a country that has had only one survey within the last 20 years. This is not a consistent measure. Or you may find a culture that has undergone civil battle.

How do we compare with other creating countries? What’s better or even worse about South Africa than say India or Brazil?

Brazil’s Gini was very similar to South Africa’s in 1994. Since that time, inequality in Brazil has fallen given the rapid rise in secondary school enrolment and graduation rates (without sacrificing quality), the introduction of conditional cash transfers and strong economic growth.

India’s poverty levels remain higher than South Africa, but its inequality levels are much lower than that of Brazil and South Africa. In contrast to both economies, South Africa since democracy has witnessed a moderate reduction in poverty amounts, combined with a sharp rise in earnings inequality since 1994. This has all been amid single-digit economic development.

How do we know how unequal Nigeria when compared with other countries? Exactly what measures are used and what issues when measuring inequality? What’s lacking in the measurements?

Global datasets on calculating inequality, such as those produced by UNU-WIDER and also the World Bank, allow us to make these cross-country comparison. Other steps of inequality include the Theil Index (to measure the contribution of between as well as within-group inequality to overall inequality) and the Atkinson Index.

One key omission in the measurement of inequality (and poverty) is that they are income-based. Hence, we do not account for non-income welfare among individuals and households. Excluded are access to public services such as energy and water together with a specific dimension of the accumulation of private assets from our standard measures of inequality and poverty.

The United Nations' Human Development Index is one attempt at trying to incorporate some of these non-income measurements into our measurement associated with welfare.

Why is inequality so pronounced in South Africa?

There is a numerous reasons, but some of the important aspects include skewed initial endowments (or assets that people and households have) post-1994 in the form of, for example, human capital, access to financial funds, and ownership patterns. Many of these, and other endowments, served to generate a extremely unequal growth trajectory, making certain those households with these greater levels of endowments gained from the small economic growth there was.

In add-on, we are an economy characterized by a growth path, which is both skills-intensive and capital-intensive, thus not generating a sufficient quantum of low-wage jobs – which is key to each reducing unemployment and inequality.

What can be achieved about it? Is there anything the political economist Thomas Piketty can teach us?

Piketty’s thesis in part proposes that schooling is critical with regard to reducing inequality in the long-run. Human capital accumulation is one possible mechanism through which to overcome a growth path where the rate of come back on capital (r) surpasses the rate of economic growth (grams) – r>g.

To generate a more equal growth path, thus equalising r and g, it is argued that the schooling and educational pipeline plays a potentially crucial role in an economy’s long-run development trajectory.

FactCheck: is South Africa the most unequal society in the world? is republished with permission from The Conversation