South Africa: Why a universal income grant makes sense

1. EARNING A DECENT SECURE WAGE IS NOT A PROSPECT FOR MILLIONS OF SOUTH AFRICANS

While the rewards of South Africa’s modest economic growth are cornered in small sections of society, close to half the population lives in poverty, and income inequality is wider than ever before.

The average unemployment rate for middle-income countries is in the 5-10 per cent range; in South Africa, it’s about 25 per cent. Add workers who have given up looking for jobs, and the actual rate sits around the 35 per cent mark.

Job creation improved modestly as economic growth accelerated in the 2000s, with about 3 million ‘employment opportunities’ created in 2002-08. The semantics are important. Very many of those ‘opportunities’ did not merit being called ‘jobs’. They divided roughly equally between the formal and informal sectors, and occurred mainly via business services, the wholesale and retail trade sectors, and public works programmes. A lot of them were crummy, fleeting and poorly paid.

When recession hit, a million jobs were vaporised. Since then, the private sector has been shedding jobs, and the public sector’s been trying to add new ones. It’s an endless game of catch-up. For many millions, not being able to find a job is a fact of life.

2. HAVING A JOB DOES NOT AUTOMATICALLY PREVENT POVERTY

Having waged work is the single-most important factor deciding whether or not a household will be poor. But earning a wage does not guarantee that you won’t be poor.

Vast numbers of workers earn wages so low and on such poor terms that their jobs don’t shield them against poverty. Increasingly that applies also to formal sector jobs. Almost one fifth (some 1.4 million) of formal sector workers earned less than R1,000 (US$125) a month in the mid-2000s, according to Statistics SA data.

Two factors drive these trends: The shift towards the use of casual and outsourced labour, and the related decline in real wages for low-skilled workers.

The average real wage is being propped up by the improved fortunes of comparatively small numbers of high-skilled, high-wage workers. Workers without tertiary qualifications lost about 20 per cent of their average real wage. And women in the formal sector earned less in real and relative terms in 2005, compared with 1995.
From the late-1970s into the 1990s, South African companies tried to compete and maintain profit levels by upgrading machinery and introducing new technologies to achieve higher productivity and reduce reliance on militant, organised workers.
Eventually the dividends dwindled, and currency crashes since the mid-1990s inflated the cost of imported technology.

The hunt for profit required another squeeze, and it was applied to the wages and terms of employment of workers who are not shielded sufficiently by labour laws and shopfloor organising.

Company profits as a share of national income rose from 26 per cent in 1993 to 31 per cent in 2004, while workers’ wages fell from 57 per cent to 52 per cent.

Companies now rely on a shrinking core of skilled, full-time workers and a larger stock of less-skilled and badly paid casual or out-sourced labour. By 2008, according to the Labour Ministry, about half the workforce was in casual and temporary jobs.

Job creation is vital. But it’s not a match-winner anymore – not in the kind of economy and labour market that defines South Africa. The quest for more – and better jobs – has to occur as part of the wider realisation of social rights.

3. SOCIAL GRANTS SEPARATE MILLIONS FROM DESTITUTION BUT IT IS ILL-SUITED TO TODAY’S REALITIES

The impact of the social grant system is beyond dispute. According to Statistics SA, the increase in incomes among the poorest 30 per cent of South Africans after 2001 was mainly due to social grants (especially the child support grant). They’re the best poverty-alleviating tool South Africa has at the moment.

Beneficiaries rose radically since 2000. The 2.6 million recipients of pensions and social grants increased to about 14 million in 2010. About 43 per cent of households in 2007 received at least one social grant; in half of them, pensions or grants were the main sources of income.

A large proportion of low-income households would probably be unviable without these grants.

The current social protection system hinges on the fiction that every worker, sooner or later, will find a decent job.

Thus the grants were designed to assist people who, due to age or disability, cannot reasonably be expected to fend for themselves by selling their labour. Meanwhile, the employed have access to employer- and worker-subsidised protection (all tied to employment status).

But large numbers of vulnerable workers are not eligible for these state grants, and do not benefit from employment-based provisions.

5. TARGETED AND MEANS-TESTED SOCIAL PROTECTION IS BURDENSOME, COSTLY AND HUMILIATING

Most states prefer to ration cash grants by targeting and tying them to certain conditions. South Africa is no different (though only the child support grant is nominally conditional at this point).

This is administratively expensive, difficult, and unfair.

It creates arbitrary divides between those who quality for social grants and those who do not – but who are equally in need.

Most means-tested social grants also involve burdensome and humiliating interactions with the state that involve ‘proving’ to a stranger that you’re poor and unable to fend for yourself and your family. Which is why huge stigma and shame tends to attach to them.

Instead, a universal income grant would form a cornerstone of a broader social protection system. It would be available to all adult citizens, and would be neither conditional, nor targeted or means-tested. The tax system would be used to retrieve (and help finance) the grants from individuals who don’t need them because their incomes are high enough.

6. A UNIVERSAL INCOME IS DEVELOPMENTAL AND WOULD BOOST WELLBEING

Cash grants bring powerful anti-poverty, developmental and economic benefits. The observed effects include reduced stunting in children and better nutrition levels, and higher school enrolment.

In a localised, universal income pilot project in Namibia, child malnutrition declined and school attendance increased significantly within six months. Recipients also became more active in income-generating activities.

They can also help drive more inclusive patterns of growth. Brazil’s expansion of social transfers (especially via the bolsa familia, a conditional grant), along with the extension of the minimum wage, has boosted internal demand for local products and services, and aided the growth of formal jobs, as Janine Berg shows in a recent paper.[1]

Financial simulations have shown that a universal grant as small as R100 per month could close South Africa’s poverty gap by 74 per cent,[2] and lift about six million people above a poverty line of R400 (US$50) per month.

7. A UNIVERSAL INCOME CAN BE A POWERFUL EMANCIPATORY TOOL, ESPECIALLY FOR WORKERS

But the impact potentially reaches much farther than gains in social justice. The key is to uncouple grants from the labour market, which a universal income grant can achieve.

This becomes a radical turn that confronts the ‘double separation’ that is imposed on workers: Separation from the means of production and the means of subsistence.

The most subversive effect is to equip people with the freedom not to sell their labour and to withdraw, at least sporadically, from the ‘race to the bottom’ between low-skilled workers in high unemployment settings.

If the bare necessities of life can be secured elsewhere, demeaning and hyper-exploitative wage labour is no longer the ‘only option’. Thus a universal income can endow the weakest with bargaining power.

Linked with other efforts to strengthen wellbeing, it can contribute toward significant redistribution of power, time and liberty.

8. A UNIVERSAL INCOME TREATS WOMEN AS CITIZENS, NOT MERELY AS CAREGIVERS AND BEARERS OF CHILDREN

Millions of women in SA have entered the labour market since 1980s, despite their exceptionally poor job and wage prospects. Three quarters (75 per cent) of African women younger than 30 years are unemployed. Most of the few who do find employment, work part-time, for low wages and in highly exploitative conditions.

Yet women also bear the bulk of responsibility for social reproduction. Overall, the sexual division of labour in both the domestic sphere and labour market remains structured in ways that enable men to monopolise full-time and better-paying jobs, while women perform most of the household labour.

Men, whether employed or not, continue to ‘free ride’ on women’s work – paid or not.

A guaranteed universal income would challenge these arrangements, by helping provide economic independence, and by strengthening the negotiating position of women who do enter the labour market.

The most optimistic prospect on the cards for South Africa is an official (narrow) unemployment rate of about 15 per cent in 2020.

More jobs are vital. But on current trends, job creation will not provide a sufficient basis for social inclusion and wellbeing.

A universal income grant would be a powerful intervention that can radically reduce the depth and scale of impoverishment, and help emancipate millions.

BROUGHT TO YOU BY PAMBAZUKA NEWS

* This article first appeared in the South African newspaper, City Press in August 2011.
* Writer and journalist Hein Marais is the author of the new book ‘South Africa Pushed to the Limit: The Political Economy of Change’, published by UCT Press and Zed Books. It is available online and at good bookstores.
* Please send comments to editor[at]pambazuka[dot]org or comment online at Pambazuka News.

NOTES
[1] Changes in labour market and social policies boosted consumption and economic growth in rural and poor areas, and created a steady demand for small retailers and service providers. That boost in demand also affected other parts of the value chain, including formal manufacturing and distribution (Berg, 2010). See Berg, J. (2010). “Laws or luck? Understanding rising formality in Brazil in the 2000s”. Working Paper no. 5. ILO Office in Brazil. ILO.
[2] The poverty gap refers to the total income shortfall of households living below the poverty line. A narrower poverty gap means more households would edge closer to, or above the poverty line.