Get real on poverty

2014-03-30 14:00

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Discontent may be rife in SA, but the statistics don’t match the national mood. Rudi Dicks and Neva Makgetla crunch the numbers

A common story has emerged in the news and commentary about poverty in South Africa: it is always, interminably, getting worse. But that narrative is untenable.

It distracts us from the real social challenge, which is to address South Africa’s persistently deep inequality. Giving people basic electricity, water and sanitation indisputably improves their standard of living, but don’t expect gratitude when they can see conditions in the leafy suburb next door.

Most people agree hunger is a good measure of poverty. From this standpoint, the trend is unambiguous. According to Stats?SA’s General Household Survey in October 1996, about one household in four said they went short on food at least sometimes.

By 2012, the figure had fallen to under one in seven.

Three main factors lie behind this success: growing government services in historically black communities, increased minimum wages and the expansion in social pensions.

Using an index that takes the main government services – that is, municipal services, health and education – as well as income into account, the Southern Africa Labour and Development Research Unit found the poverty rate dropped from 37% in 1993 to 8% in 2010.

In 1994, for instance, only about half of African households had electric lights. Today, six out of seven have electricity. Consider the impact on rural households. In the past, women spent hours fetching wood and water, then had to cook on coal stoves and face darkness lit only by candles at night. Today, most have some electricity at least for lighting, and many also have access to running water. All of that means less family work.

Contrary to the widespread myth of jobless growth, employment has also expanded relative to the population. In 1994, less than 40% of all working-age people had jobs. At the end of last year, the figure

was 43%. But internationally, about 60% of adults are employed, suggesting we still have a long way to go.

In 2012, two-fifths of all workers and at least two-thirds of elementary workers were covered by minimum wage determinations. The main beneficiaries were the 1.7?million domestic and farm workers. Their pay more than doubled in real terms from 2002 to 2012.

Finally, social pensions are a critical means of support for many families. Studies by the social development department, the UN Children’s Fund and the Electric Power Research Institute have found that the grant system (in particular, the child support grant) significantly reduced intergenerational poverty, with young children displaying improved cognitive development, a lower rate of childhood illnesses, and better school attendance and educational outcomes.

In part, the ongoing debates about trends in poverty since 1994 reflect data problems. Work on the presidency’s 20-year review underscored the challenges in this regard. South Africa does not have an agreed-on poverty line – that is, an income below which we would consider someone to be poor. There are two internationally used poverty lines, set at $1 and $2 a day.

But using the international figures can pose risks. The median household income in 2012, according to Stats?SA’s General Household Survey that year, was just under R3?000 a month. At $11 to the rand, that exceeded $2 a day per person. But a change in the value of the rand in dollars would change the dollar value of South African incomes. If we use the international measure, the poverty rate would also change, although living standards and nominal incomes would remain unchanged.

Furthermore, the figures for the 1990s were not reliable. Before 1994, official statistics excluded Africans. Reliable data only became available with the General Household Survey and the Labour Force Survey in the early 2000s.

Finally, since 1994, government services have improved for poor households while household size has fallen by close to half. So household incomes have to support fewer people, which affects the poverty rate. A more fundamental reason for endless debates on poverty trends is that income gains for the rich have outstripped improvements for the poor.

Poverty measures the standard of living of households at the lower end of the income scale, which has undoubtedly improved. But inequality in essence asks what share of the national income goes to the richest households, say the top 5% or 10%.

As long as the richest households capture more than 50% of national income, South Africans will measure their gains against the luxuries of the rich, not the poverty of their past.

A number of figures show how unequal South Africa remains. Using the Gini coefficient, a standardised index of inequality, South Africa ranked last among the 129 countries that reported a figure for the World Bank’s World Development Indicators in the mid-2000s.

Efforts to detail trends in inequality from the 1990s rely on comparisons between divergent surveys and heroic assumptions. Still, most studies suggest modest improvements, at best, in income inequality since 1994.

The functional distribution of income – that is, the division of national income between wages and profits – provides an alternative indicator.

In South Africa, the share of wages in the national income decreased from 50% in 1994 to a low of 43% in 2008, mostly because mining profits rose as commodity prices boomed. With the economic downturn in 2008/09, the share of remuneration recovered, reaching 47% of the national income by last year.

Arguing that the rate of poverty has not improved requires dedication to the narrative that everything is getting worse, combined with a willingness to ignore or distort the evidence. It fails to acknowledge the effects of fiscal redistribution over the past 20 years.

But stronger social cohesion requires not just improved conditions, but a substantial reduction in the profound economic inequalities that continue to divide us.

Dicks and Makgetla are public servants

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