The Archive
Accessible, evidence-based analysis on growth and inclusive development in South Africa.
South Africa is the most unequal country in the world in terms of people’s income. But, two decades after apartheid’s demise, why has our urban and rural geography changed so little – and how does this reinforce inequality? This was the question at the centre of a recent REDI workshop on spatial inequality that brought together researchers, policymakers, and planners working in both urban and rural spaces.
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The building of large numbers of housing units in isolated greenfield locations has had detrimental side effects on our cities over the last two decades. Yet a series of new megaprojects, designed to accelerate the delivery of housing, is now on the cards. Because they are to be built on cheap peripheral land, these schemes threaten to reinforce urban fragmentation, inefficiency and exclusion.
Through progressive taxation and pro-poor social spending, the SA fiscal system reduces income inequality significantly. The extent of this reduction is larger than in twelve comparable middle-income countries measured similarly. Nevertheless, ‘final’ income (i.e. income after major taxes, government transfers and spending) remains more unequal than in comparator countries. While the fiscal system has an important role to play in reducing inequality, interventions to improve the distribution of wages, salaries and capital income are needed.
The time and monetary costs of commuting are extremely high and have increased over the last 20 years. They imply a substantial ‘tax’ on the wages of those who commute to work, notably on the users of public transport. Commuters increasingly use private vehicles and minibus taxis today compared to 1993. The government’s public transport subsidies seem to benefit those in the (lower) middle of the income distribution rather than low-income workers.
The problematics of the situation in South Africa are clear: high unemployment, high inequality and low growth, combined with a lack of consensus on what to do. It might be more fruitful to think in ‘grand bargain’ terms: a package of policies that are intended to balance opposing perspectives whose differences cannot be resolved through technical debate – and to set short-term political-economic imperatives against the longer time horizon needed for policy interventions to address deep structural legacies
It has been argued that properly focused workplace intermediaries can reshape the labour market to become more youth friendly. Case studies of NGO intermediaries in South Africa offer some optimism but also caution in this regard. Although the intermediaries were able to match unemployed youth to jobs, smooth the transition to work and even positively influence employers’ reticence, they are small in scale and costs are high – and they have yet to broker larger pacts to add more jobs.
Labour-market intermediaries can make a significant contribution to the reduction of youth unemployment.They recognise that the demand for labour is not fixed. By reshaping the attributes and broader workplace skills of the young jobseeker, labour market intermediaries can help overcome employers’ reticence to employing first-time workers. Such interventions, although small in scale, may be more successful than larger public works schemes of government. The potential positive impact of such intermediaries is demonstrated with international examples.
The inflexibility of the labour market is commonly used as a scapegoat to explain high unemployment. Yet new evidence shows that only in specific contexts (unionized workers in the short run) does wage rigidity restrain the ability of the labour market to absorb workers. In the long run, wages are much more flexible and structural factors explain more of the unemployment puzzle. The policy debate on unemployment and wage flexibility needs to take these subtleties into account.
Informal urban settlements have a poor reputation as hotspots of social unrest, squalor and crime. Yet there is another side to them: as communities that are determined to lift themselves out of poverty via jobs in the city. In a society marked by severe social and spatial inequalities, these places may be useful vehicles for upward mobility. The ambivalence of government policy towards informal settlements needs to be replaced by a more positive approach.
In most countries with VAT, certain goods and services are zero rated to alleviate the tax burden on the poor. However, this may not be the most cost-effective way of helping the poor. We investigate the appropriateness of the products currently zero rated and the impact of this on the poor, the implications for tax revenue were it to be removed, and the contribution to poverty relief of zero rating compared to targeted social transfers.
The public debate on a national minimum wage sometimes appears to occur in different universes. Two recent contributions to Econ3x3 may help to take the debate forward. This article analyses and contrasts these views and finds that, though they emphasise (and underplay) different aspects, the differences may not be insurmountable – especially once one recognises that the proposals apply to different time frames. [A shorter version of this article appeared as an op-ed article in Business Day on 25 June 2015. See references.]
Although many children are maltreated at home, we know little about the effects of abuse on long-term child development. This article explores the association between different ways in which children are maltreated and two educational outcomes (numeracy test scores and dropout). Children who are physically maltreated (e.g. hit hard) regularly suffer severe adverse consequences in terms of their numeracy test scores and probability of dropout – and hence their chances of employment and higher earnings.
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Most contributions to the debate on a national minimum wage adopt a narrow view of labour markets and accept that the structure of the economy will remain essentially as it is. We question both of these assumptions. Further, we argue that a national minimum wage, at a level to be determined through careful research, must be part of a well-designed package of longer-term policy reforms that look beyond the labour market and support employment growth through investment.
A small-area census of micro-enterprises in Cape Town townships reveals that informal enterprises are located throughout the township, including in the residential areas. Three-quarters of the enterprises are located beyond the ‘high-street’. The most common enterprises (liquor and spaza shops) are not situated in what one would expect to be the prime business area with its considerable pedestrian traffic, but are in residential areas. Policies to promote the township economy need to come to terms with this reality.
The share of labour in aggregate income in South Africa has declined significantly since 1993, while that of capital has increased. Concurrently, real wages have increased slower than productivity. This article argues that financialisation and the more aggressive returns-oriented investment strategies applied by large, global investment institutions have translated into investors requiring higher rates of return on capital. This, in turn, has led to the increased adoption of capital-augmenting, labour-saving technology that has reduced labour’s share of total income – with important consequences for income distribution.