Understanding Working Poverty in South Africa

The Working Poor in South Africa: 1997-2012 Michael Rogan & John Reynolds

Content International context International Labour Organisation SA context Income, wages & earnings over post-apartheid period How we analysed working poverty in SA What we found out about the SA working poor Concluding remarks

International context Early work in developed countries explored growth of working poverty during last two decades of previous millennium Time of erosion of welfare state regimes Renewed research interest after 2008 financial crisis and ensuing period of austerity in many OECD countries Working poverty a fairly typical & growing type of poverty in USA, Canada, Europe and Australia One 2010 study found the rate of working poverty was higher than unemployed poverty in 14 out of 18 developed countries Less research in developing countries Data constraints & research focus on underemployment, informal employment and subsistence agriculture Historically, Sub-Saharan Africa has seen the worst working poverty trends

International Labour Organisation if a person s work does not provide an income high enough to lift them and their families out of poverty, then these jobs, at the very least, do not fulfil the income component of decent work and it is likely that other components are not being fulfilled either (ILO s 2009 Guide to the new Millennium Development Goals Employment Indicators, including a full set of Decent Work Indicators) Research on working poverty outside OECD countries dominated by ILO through its Key Indicators of the Labour Market (KILM) series ILO focus on decent work sharpened from early 2000s In 2008, working poverty rate introduced as an indicator for following new target in support of MDG 1 (eradication of extreme poverty and hunger): Achieve full and productive employment and decent work for all, including women and young people ILO explicitly links working poverty and decent work ILO definition of working poverty: A person is working poor if she/he is employed and lives in a household in which per-capita income or expenditure is below the poverty line

South African context SA continues to experience one of the highest levels of income inequality in the world High levels of poverty e.g. in 2011, almost half of households lived below the minimum living level used by the National Planning Commission Expanded unemployment rate has consistently been above 30% in the post-apartheid period Focus on these very high levels of unemployment and on the economic strategies required to generate sufficient numbers of jobs, has pushed into the background the issue of working poverty or poverty among the employed

Income, wages & earnings over post-apartheid period Total income shares of households in lower and middle income strata decreased in 1993-2008 even though the number & percentage of households in those strata increased During that period, income growth was higher at the tails of income distribution, and particularly skewed towards top income deciles Without expansion of social grant system, households in middle of income distribution would have gone backwards during that time There has been stagnant growth in real earnings at the median since 1994, but strong growth at the top end of the distribution Evidence of wage growth at the 10th percentile BUT consumption expenditure of those at bottom end of income distribution eroded by anti-poor inflation in 2005-2010 Evidence that roughly a fifth of South African workers earned poverty wages in the early 2000s

Our analysis of working poverty in South Africa ILO definition of working poverty used Income & expenditure data from following StatsSA surveys used: October Household Surveys (OHSs) conducted annually from 1993 to 1999 General Household Surveys (GHSs) conducted annually since 2002 Used data from seven surveys between 1997 & 2012 Poverty lines used (expressed in per capita terms in 2000 prices): StatsSA (2008) lower- and upper-bound lines Hoogeveen & zler (2005, 2006) upper line

Working poverty rates, 1997-2012 at two poverty lines 100 90 80 70 60 50 % 40 30 20 10 0 1997 1999 2004 2006 2008 2010 2012 StatsSA upper poverty line (R323 at 2000 prices) StatsSA lower poverty line (R219 at 2000 prices)

Poverty rates, 2004-2012 for total population, adults and workers using the Upper StatsSA poverty line (R323 in 2000 prices) 70 60 50 40 P0 30 20 10 0 2004 2006 2008 2010 2012 All Adults Workers

The South African working poor In 2012, more than a fifth of workers were still living in households with a level of income which did not meet their minimum basic needs In 2012, more than a third (36%) of workers lived in households with a level of income that was just enough to meet their most basic needs Looking at the same issue slightly differently: poor South Africans increasingly likely to live with a worker (at the upper poverty line) In 2012, 58% of poor South Africans lived with an employed person Grant income became slightly more important to the reduction of the working poverty headcount between 2004 and 2012, while the contributions of wages decreased slightly Contribution of social grant income to reducing the depth of working poverty increased in relative terms, particularly between 2004 and 2010 (see graph below) Suggests that, without social grant income, the gains made by the working poor over the early 2000s would have been more limited

Relative contributions to reducing the working poverty gap (P1) by income source, 1997-2012 100% 90% 80% 70% 60% 50% 40% 30% 20% 1997 2004 2010 2012 Earned income Grant income Other income

Concluding remarks General decline in working poverty Particularly after 1999 But not statistically significant between 2006 and 2012 Working poverty still a significant problem Labour market changes have not added much to the effects of the expansion of the social grant system Contribution of the labour market to human development is not reaching its potential SA has both unemployment and working poverty problems we don t just need jobs, we need decent jobs