A new report on development progress in South Africa has been released. This one is titled Overcoming Poverty and Inequality in South Africa: An Assessment of Drivers,
Constraints and Opportunities. It is prepared by the World Bank, and it is a useful report. It confirms what we already know, and reports arising from the National Income Dynamics Study have shown – progress on reducing inequality and increasing employment is slow. Moreover, there is a long history arguing this point – South Africa has many case studies arguing this point, our national statistics agency has argued this before, and there is a stand of polemic and more ideological literature on the left that has argued for the existence of poverty traps. The importance here is that government endorses the report, with an event and even a Minister in attendance. You can even watch the event on YouTube.
Edit – After posting this article, I shared on Facebook with these words. I think it better says what I am arguing:
Potentially, this means that voices arguing for structural change have a more receptive ear in government? Or does it mean a retreat to economic conformity? Time will tell what this all means. After that rant, lets move on to the data in the report.
There are how two bits in the report that I think is particularly important:
1. South Africa also lags its peers on the inclusiveness of consumption growth
The report argues:
Inclusiveness in this case is examined by comparing the rate of consumption growth for the bottom 40 percent of the population to that of comparator countries as well as Saharan Africa and the World. The result: the bottom 40 percent had consumption growth of 3.5 percent between 2006 and 2011, with a deceleration of 1.4 percent for the period between 2011 and 2015. This does not compare well with the median for the world (3.9 percent) or, in the later period, with SubSaharan Africa (Figure 3). South Africa’s BRICS partners—in this case Brazil, Russia, and China—fare better than South
Africa in terms of inclusiveness of growth.
The graph recording this is below:
2. Inequality of opportunity, measured by the extent to which race, parents’ education, parents’ occupation, place of birth, and gender influence opportunities, is high.
The report reads as follows:
The labor market is effectively split into two extreme job types. At one extreme is a small number of people with highly paid jobs in largely formal sectors and larger
enterprises, at the other extreme is most of the population, who work in jobs that are often informal and pay less well. The highly paid jobs are highly sticky: once people find these jobs they are unlikely to give them up. The less well-paying jobs are more fluid, more likely to employ new entrants into the labor market, and more likely to
witness exits from employment. The wages between the two extremes are highly unequal (Figure 5): those with highly paid jobs earn nearly five times the average wage
in low skilled jobs, yet they constitute less than a fifth of the total working population. Thus, while a segment of the population enjoys wages that are on average equal
to workers living in developed economies, the wages of those at the lower end of the distribution are comparable to those seen among the poorest countries.
As the mandarins in the South African government say, “I pause”