Inequality and income distribution

Enabling growth: redistribution priorities for South Africa

Andrew Donaldson, National Treasury on 12 November 2014
Reads 9,909

If the National Development Plan is to be effectively implemented, we need clarity about the mechanisms through which growth and redistribution can be jointly advanced. Priorities include social security reform and quality improvements in social services, urban development, housing and public-transport investment. Expanding employment opportunities is the most pressing challenge, requiring policies that might include: support for labour-intensive industry and agriculture, small enterprise and informal sector development, well-targeted skills programmes, and wage or employment subsidies. Recognising the complementarity between redistributive and growth-enhancing measures is essential.

Redistribution is part of the toolkit to promote growth

Andrew Donaldson, National Treasury on 7 October 2014
Reads 8,857

A recent IMF study of several countries provides robust evidence that a high level of income inequality weakens the prospects of sustained economic growth and reduces the duration of growth spells. Redistributive steps, by contrast, do not have a noticeable negative effect on growth. Therefore, a reduction in inequality that is achieved through redistributive steps could have a net pro-growth effect. The policy challenge for South Africa is to find the best policy mix to achieve that.

How suitable is a ‘developmental state’ to tackle unemployment, inequality and poverty in South Africa?

Philippe Burger, University of the Free State on 26 March 2014
Reads 11,707

The National Development Plan envisions the achievement of a ‘capable and developmental state’. Developmental states are usually associated with high economic growth. Such states in East Asia often are seen as models for SA to emulate. However, given the structure of the SA economy, state and society, a developmental state is not suitable, nor attainable. The concept of a social investment state is a better alternative, but it will need key institutional and policy reforms to work.

What does the ‘middle class’ mean in a polarised, developing country such as South Africa?

Ronelle Burger, Stellenbosch University on 11 March 2014
Reads 13,516

In a developing, highly unequal country such as South Africa, it is unlikely that a definition of the middle class that is based on an income threshold will adequately capture the political and social meanings of being middle class. We propose a multi-dimensional definition, rooted in the ideas of empowerment and capability, and find that the ‘empowered middle class’ has expanded significantly since 1993. It also is much larger than when measured in terms of income.

Is the middle class becoming better off? Two perspectives

Justin Visagie, Human Sciences Research Council on 15 July 2013
Reads 11,184

Two very different pictures emerge when one compares income changes of the relatively affluent ‘middle class’ with those of people in the literal middle of the income spectrum. In the affluent middle there has been significant racial transformation and growth of the ‘black middle class’. However, households in the actual middle of the income spectrum have experienced the lowest income growth of all groups since 1993. Both perspectives are crucial for the pursuit of an equitable path of development.

Who are the middle class in South Africa? Does it matter for policy?

Justin Visagie, Human Sciences Research Council on 29 April 2013
Reads 79,727

The middle class is a hot topic in media and policy circles. But how should the middle class be defined, particularly in a country with high levels of inequality? Individuals and households which fall in the actual middle of the income distribution in South Africa have a standard of living well below a ‘middle-class lifestyle’. Defining the middle class on the basis of the ‘actual middle’ versus ‘relative affluence’ provides vastly different pictures. This necessitates great care in using these conceptions, especially in policy design.

The Budget: both the fiscal stance and ‘structural stance’ are sound

Kuben Naidoo, National Treasury on 25 March 2013
Reads 7,428

Many economists have argued that the government’s fiscal stance in the recent budget is verging on the risky. This article argues that the fiscal stance is both correct and prudent. In addition, the article puts the budget in a broader developmental context, highlighting its contribution to long-term growth and development and to tackling poverty and inequality.

Reducing inequality to promote growth: a proposed policy package

Kuben Naidoo, National Treasury on 30 January 2013
Reads 26,123

Any growth strategy for South Africa should include elements that address inequality explicitly. This article identifies reforms that are likely to support growth in the long term and proposes a policy framework to ensure a more equitable distribution of the dividends of economic growth. These relate to high-quality education for the poor, progressive taxation, a social safety net, anti-monopoly policies and labour market reforms to promote the employment of low-skilled people.

How structural inequality limits employment and self-employment in poor areas (or: Why South Africa’s informal sector is so small)

Kate Philip, Advisor to the Presidency on Short-term Strategies for Employment Creation on 16 November 2012
Reads 14,711

Given South Africa’s high levels of unemployment, the relatively small size of the micro-enterprise sector is a conundrum. This article argues that structural inequality is the reason for this – in particular, inequality in the structure of the economy, the legacies of spatial inequality and the continued inequalities in human development. Their combined effect is to limit the scope for poor people to escape poverty via self-employment. This explains the limited extent and small range of informal employment.