Inequality and income distribution

The Covid-19 crisis has amplified spatial inequalities

Ivan Turok, HSRC and University of the Free State respectively on 1 October 2020
Reads 5,147

The economic and social crisis induced by Covid-19 is unfolding in different ways across the country. New evidence from the NIDS-CRAM survey reveals that the pandemic has widened pre-existing inequalities between cities and rural areas. Within cities it has magnified the gap between suburbs, townships and informal settlements. A premature withdrawal of government relief schemes could aggravate the hardship and suffering in poor communities that have come to rely on these resources following the jobs slump.

The top 1% of incomes are increasing rapidly even with low economic growth

Ihsaan Bassier, SALDRU, University of Cape Town on 12 September 2018
Reads 35,928

We use tax data (which include accurate data for the very rich) to investigate the patterns of income growth over the period 2003 to 2016. Despite the need for inclusive economic growth in the light of extreme inequality, the top 5% of incomes grew at about 5% per year compared to national income growth of 3.7% per year. This divergence is striking in the post-recession period and appears to be partially driven by high growth in income from capital.

Are we measuring poverty and inequality correctly? Comparing earnings using tax and survey data

Martin Wittenberg, University of Cape Town on 3 October 2017
Reads 23,454

Calculating the earnings Gini coefficient with survey data from the Quarterly Labour Force Survey (QLFS) may lead to an underestimation of inequality. When one compares earnings in the tax assessments data to those in the QLFS, it appears that the earnings of employees in the QLFS are underreported. Benefits and annual bonuses contribute substantially to the gap. In the case of self-employment incomes, the top earnings in the QLFS are also underreported, but the tax data seems to miss many mid- and low-income earners.

REDI3x3 conference: Policies for inclusive growth

Murray Leibbrandt, University of Cape Town on 15 February 2017
Reads 9,387

The REDI3x3 research project has completed most of its research at a time when unemployment, poverty and inequality is intense. With growth at just 0.5%, government needs to become more innovative in fixing the social policies that hamper progress. It should draw on all the research evidence to find ways to transform the structure of the economy without inhibiting growth. Addressing education, low labour intensity, the informal sector and the spatial legacies of apartheid can make a real difference.

Wealth inequality – striking new insights from tax data

Anna Orthofer, Department of Economics, Stellenbosch University on 24 July 2016
Reads 49,595

Although South Africa is known for its extreme income inequality, the degree of wealth inequality is even greater. New tax and survey data suggest that 10% of the population own at least 90–95% of all assets, in contrast to their earning ‘only’ about 55–60% percent of all income. The finding supports the ongoing proposed reforms to close loopholes in estate taxation (Davis Tax Committee) and expand the coverage of pension systems (National Treasury).

Do government spending and taxation really reduce inequality, or do we need more thorough measurements? A response to the World Bank researchers

Patrick Bond, University of the Witwatersrand on 10 February 2016
Reads 15,186

World Bank staff and consultants claim that South Africa’s progressive taxation and pro-poor social spending reduce the Gini inequality coefficient from 0.77 to 0.59. But their data and methodology are deficient: their research ignores large areas of government spending and taxation that may significantly increase inequality. Thus their conclusion that fiscal policy is redistributive is overhasty and unfounded – whilst it is prone to be used, or misused, to promote a budget-cutting political agenda.

How much is inequality reduced by progressive taxation and government spending?

Ingrid Woolard, Stellenbosch University on 28 October 2015
Reads 95,652

Through progressive taxation and pro-poor social spending, the SA fiscal system reduces income inequality significantly. The extent of this reduction is larger than in twelve comparable middle-income countries measured similarly. Nevertheless, ‘final’ income (i.e. income after major taxes, government transfers and spending) remains more unequal than in comparator countries. While the fiscal system has an important role to play in reducing inequality, interventions to improve the distribution of wages, salaries and capital income are needed.

Labour and unemployment in South Africa: towards a ‘grand bargain’

Ravi Kanbur, Cornell University on 7 October 2015
Reads 20,212

The problematics of the situation in South Africa are clear: high unemployment, high inequality and low growth, combined with a lack of consensus on what to do. It might be more fruitful to think in ‘grand bargain’ terms: a package of policies that are intended to balance opposing perspectives whose differences cannot be resolved through technical debate – and to set short-term political-economic imperatives against the longer time horizon needed for policy interventions to address deep structural legacies

How effective is VAT zero rating as a pro-poor policy?

Ada Jansen, Stellenbosch University on 20 July 2015
Reads 20,223

In most countries with VAT, certain goods and services are zero rated to alleviate the tax burden on the poor. However, this may not be the most cost-effective way of helping the poor. We investigate the appropriateness of the products currently zero rated and the impact of this on the poor, the implications for tax revenue were it to be removed, and the contribution to poverty relief of zero rating compared to targeted social transfers.

Technology, labour power and labour’s declining income share in post-apartheid South Africa

Philippe Burger, University of the Free State on 17 February 2015
Reads 18,574

The share of labour in aggregate income in South Africa has declined significantly since 1993, while that of capital has increased. Concurrently, real wages have increased slower than productivity. This article argues that financialisation and the more aggressive returns-oriented investment strategies applied by large, global investment institutions have translated into investors requiring higher rates of return on capital. This, in turn, has led to the increased adoption of capital-augmenting, labour-saving technology that has reduced labour’s share of total income – with important consequences for income distribution.