South Africa's Intractable Unemployment

In the wake of the economic crisis and the ensuing period of austerity, there has been a renewed interest in the working poor in developed countries, including the US and the UK. In america, in particular there are concerns concerning the rising number of people who have 2 or 3 different jobs but that still cannot make ends meet.

In Nigeria, the release of the latest joblessness figures is a reminder that the country has a different problem. Unemployment seems to have been one of the greatest challenges since the first democratic elections in 1994, with roughly 25% of the labour force consistently being unemployed.

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

However, the “triple challenge” of lower income, inequality and unemployment requires that all of us consider how the labour market is linked with the goal of poverty decrease. In other words, is poverty just a problem of unemployment within South Africa or are employed people also living below the lower income line? Perhaps just as significantly, is the situation of working South Africans improving concerning poverty?

Although not often recognised, South Africa has both an unemployment problem along with a working poverty problem. Which roughly one-fifth of South Africa 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-fifth of South Africa’s total workforce has been living in households, which aren’t able to meet their basic minimum food and non-food requirements. This really is according to Statistics South Africa’s recognized upper-bound poverty line.

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

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

At the same poverty line, about half of all bad South Africans lived with an used person in 2012. This means that joblessness 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, the reason why has progress towards decreasing working poverty not already been sustained since 2006? There are a number of ways to answer this question, however 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 to mid-2000s as government expanded the social grant system. The contribution associated with social grants to poverty reduction can be seen in the high drop – from 60% to 55% – in poverty rates between 2004 and 2006 (own computations). Since 2006, poverty prices have continued to decrease but at a slower rate.

Social grants or loans were also an important part of the decrease in working poverty in early to mid-2000s. This explains a lot of the drop in the working poverty rate between 2004 and 2006. However, the rate of social grant expansion was not sustained over a longer period and the working poverty rate stabilised following 2006.

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

In add-on, in relative terms, the rise 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 variety of implications associated with these bits of information. In terms of labour market coverage specifically, studies of working poverty often contribute, at least tangentially, to debates on work market flexibility.

While the research discussed here cannot contribute to this debate directly, it is important to note that working poverty within South Africa has persisted over a length, which saw:

* both high and low levels of economic growth

* high and chronic level of unemployment

* the onset of as well as (partial) recovery from a main financial crisis

* the introduction of protective work market legislation

* the expansion of the social grant system

The persistence of operating poverty and unemployment amid the interplay of these possible drivers and mediators of reduced earnings perhaps offers more concerns than answers as to the sclerotic character of South Africa’s work market. The key question is in which the responsibility lies for the roughly one-fifth of the country’s workforce that resides in poor households.

Private and public employers surely have some level of responsibility with regard to ensuring a minimum level of decent wages. At the same time, the greater social responsibility for vulnerable workers is something, which should also be discussed more widely.

While we can debate the definition of poverty and the way in which we choose poverty lines, we must end up being clear that no one ought to live below, or even near, any of South Africa’s recognized national poverty lines.

How high unemployment has eclipsed the plight of South Africa’utes working poor is republished with permission from The Conversation