Anyone seeking a concise account of the South African government’s failures in tackling poverty and inequality need look no further than its recently published ‘25-year review’.
The review lists numerous projects and plans as part of its efforts to reduce unemployment and its ‘war on poverty’. It then comments that these have not had ‘the envisaged’ effect, even though various government programmes have ‘cushioned’ its ‘devastating impact’. Poverty declined between 1993 and 2013, but has since increased, unemployment remaining ‘the largest contributor’. Youth unemployment ‘rose sharply’ between 2008 and 2018. As for Black Economic Empowerment policies, these have had a ‘negligible effect in redistributing wealth’.
None of this should come as a surprise, the Institute of Race Relations (IRR) having repeatedly warned that investment, economic growth, and job creation would be undermined by the government’s never-ending cascade of interventionist policies, including racial preferencing and pro-union labour law.
The review says that ‘Today, South Africa is the most unequal society in the world’. This claim is based on incomplete evidence. Earlier this year, the Helen Suzman Foundation pointed out that only 149 of the 218 countries and territories listed by the World Bank reported their Gini coefficients.
Also recently published, by Statistics South Africa (Stats SA), is a lengthy study of ‘inequality trends’. Making use of expenditure surveys, it shows that the Gini coefficient among black Africans in 2015 was higher than the figure for all three of the minority population groups. The black African figure thus stood at 0.57 against the figure for coloured people of 0.56, while the Indian/Asian figure was 0.45 and that for whites 0.41.
Since a Gini coefficient of zero indicates absolute equality, while a coefficient of one shows absolute inequality, these figures mean inequality is greater among black Africans than it is among the others.
Looking at trends over time, the Gini coefficient shows that overall inequality in South Africa declined somewhat between 2006 and 2015. But if the figures are broken down by race, differing trends are apparent. Inequality among the coloured minority remained constant at 0.56. Among Indians/Asians it dropped from 0.52 to 0.45 and among whites from 0.43 to 0.41. But among black Africans inequality increased over that same period from 0.54 to 0.57.
Accordingly, not only is inequality among black Africans greater than among the other groups, it has also been increasing. Stats SA figures based on income differ from those based on expenditure, but the trends are the same.
Stats SA comments that the labour market is ‘crucial’ to understanding income inequality. Two thirds of inequality comes from inequality in earnings, and about half of this is due to extremely high levels of unemployment. Black Africans are the most ‘disadvantaged’ in finding employment, and they earn ‘substantially’ less than whites. ‘Disproportionately’ large wage increases for highly educated workers have led to a ‘substantial’ increase in inequality.
Further comparing incomes, Stats SA reported that the top 10% of black Africans earned 7 times as much as the bottom 40%. The comparative figures for the three minority groups were: coloured 4.7 times as much, Indian/Asian 4 times as much, and white 2.4 times as much. These income figures thus also confirm the expenditure figures showing greater ‘within-group’ inequality among black Africans than among the three minority groups.
Unlike much writing on inequality, Stats SA refers repeatedly to the labour market. It says the different ‘labour market experiences’ of the different population groups ‘still reflect the strongly persistent legacies of apartheid policies’. It also says that inequality in the labour market has ‘increased in the recent past’, although how this can be the result of apartheid is not explained.
The labour market remains one of the key institutions through which the country’s ‘exceptionally high levels’ of inequality get transmitted. Moreover, the rise in wage inequality would be ‘even steeper’ if the unemployed were included as ‘zero earners’.
Stats SA is right to focus on the labour market. The problem with that market is that excessive regulation and union power prevent it from operating efficiently. The result is widening inequality within the poorest section of the population.
Stats SA speaks of ‘interventions’ to reverse inequality. What the country really needs is less intervention and more liberalisation.
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