Seven reasons for an income grant

2011-08-29 10:10

Is job creation really the best way to provide a better life for all in countries with chronic unemployment? Surely a universal income grant makes more sense, argues Hein Marais

Earning a secure wage is unlikely for millions of South Africans

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 between 5% and 10%. In South Africa, it’s about 25%.

If you add workers who have given up looking for jobs, the actual rate sits around the 35% mark.

Job creation improved modestly as economic growth accelerated in the 2000s, with about 3 million “employment opportunities” created between 2002 and 2008.

The semantics is important. 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.

When recession hit, a million jobs were vaporised. Since then, the private sector has been shedding jobs, and the public sector has been trying to add new ones. It’s an endless game of catch-up. For millions, unemployment is a fact of life.

Having a job does not automatically prevent poverty


Having waged work decides whether or not a household will be poor. But

earning a wage does not guarantee that you won’t be poor. Increasingly,

this also applies to formal sector jobs. Almost 20% (1.4 million) of

formal sector workers earned less than R1 000 a month in the mid-2000s,

according to Stats 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.

Workers without tertiary qualifications lost about 20% of their average

real wage. And women in the formal sector earned less in real and

relative terms in 2005 compared with 1995.

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

Job creation is vital. But it’s not a match-winner any more. The quest

for more – and better jobs – has to occur as part of the wider

realisation of social rights.

Social grants help, but are ill-suited to today’s realities

The impact of the social grant system is beyond dispute. Grants make up the best poverty-alleviating tool South Africa has at the moment.

The 2.6 million recipients of pensions and social grants increased to about 14 million last year.

About 43% of households in 2007 received at least one social grant.

In half of these households, pensions or grants were the main sources of income.

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.

Targeted social protection is costly, burdensome 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

divisions between those who quality for social grants and those who do

not.

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. This is why a huge stigma is attached to grants.

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 nor 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.

Universal income is development and would boost well-being

 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.

Grants 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.

Financial simulations have shown that a universal grant as small as R100 a month could close South Africa’s

poverty gap by 74%, and lift about six million people above a poverty

line of R400 a month.

Universal income can be a powerful emancipatory tool

 The impact potentially reaches much further 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”.

Linked with other efforts to strengthen well-being, a universal income can contribute towards significant redistribution of power, time and liberty.

Universal income makes women citizens, not only caregivers

 Millions of women have entered the labour market since the 1980s. 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.

A guaranteed universal income would help provide economic independence and strengthen the negotiating position of women.

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

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

» Marais is the author of South Africa Pushed to the Limit: The Political Economy Change, published by UCT Press and Zed Books. It is available online and at good bookstores



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