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Trends in South African income distribution and poverty since the fall of apartheid

Literature › Works

Murray Leibbrandt; Ingrid Woolard; Arden Finn; Jonathan Argent (2010). Trends in South African income distribution and poverty since the fall of apartheid. OECD Social, Employment and Migration Working Papers No. 101 (DELSA/ELSA/WD/SEM(2010)1). OECD, Directorate for Employment, Labour and Social Affairs.
Type working paper
Scope Post-1994 South African economy
Method descriptive quantitative
Period studied 1917–2008
Regions South Africa
Themes inequality poverty unemployment, labour markets wages, transition post apartheid, demography urbanisation, methods data sources, education human capital, origins segregation
Citation key leibbrandt2010

Argument

The report documents that aggregate income inequality in South Africa rose between 1993 and 2008 (Gini 0.66 to 0.70), while income poverty fell only marginally. Between-race inequality has declined but within-race inequality, above all among Africans, has risen enough to stop aggregate inequality falling. The labour market (rising unemployment and earnings dispersion) is the dominant driver of inequality and has not reduced poverty. Social assistance grants, not labour market gains, account for the modest poverty improvement. The authors argue this is a long-run legacy of racial privileging under apartheid, so policy should address intra-African inequality and not rely only on race-based redistribution. Evidence comes from comparable household surveys (1993, 2000, 2008), with inequality decomposition, FGT poverty indices and dominance analysis, plus a review of social policy.

Evidence and method

Household survey microdata: 1993 PSLSD (SALDRU), 2000 IES/LFS (Stats SA), 2008 NIDS wave 1. Also Sept 2007 LFS (EPWP module), GHS/OHS 1997-2006, National Treasury budget reviews, SASSA administrative data, and a long-run per-capita income series by race from Leibbrandt et al. (2001). The census-based and survey literature is reviewed (Whiteford & van Seventer, Van der Berg et al., Meth, Hoogeveen & Özler, Bhorat et al.). Methods include Gini and generalised entropy decompositions, Shorrocks/Lerman-Yitzhaki income-source decompositions, FGT poverty indices, CDF dominance analysis and microsimulation of the OAP and CSG.

Findings

  • Aggregate Gini rose 1993-2008, and inequality rose within every race group. (p. 33)

    Table 2.6 shows that the Gini coefficient in South Africa rose from 0.66 in 1993 to 0.68 in 2000 and further to 0.70 in 2008.

  • Income is increasingly concentrated in the top decile. (p. 26)

    Across the three years the richest 10% accounted for 54%, 57% and 58% of total income respectively

  • The within-race share of inequality grew substantially, so intra-race inequality now dominates. (p. 34)

    According to the GE(1) measure, inequality within racial groups contributed 48% to overall inequality in 1993. By 2008 this figure had risen to almost 62%.

  • Labour market income dominates inequality; transfers contribute almost nothing to it. (p. 34)

    this labour market income dominates the inequality of household income with a contribution between 85% and 90% across in the three years.

  • Participation rose faster than employment absorption, raising unemployment in every decile. (p. 32)

    participation rates increased faster than absorption rates with a consequent increase in unemployment rates across all deciles.

  • Headcount poverty fell only slightly, but the poverty gap fell more. (p. 36)

    Looking at the headcount ratio for both poverty lines it seems clear that poverty has fallen slightly over the 15 year period.

  • Without grants poverty would have worsened rather than improved, especially after 2000. (p. 45)

    Without government grants poverty would worsen over time rather than improve.

  • Urban poverty rose and the urban share of the poor grew, driven by urbanisation. (p. 37)

    Over the period poverty incidence barely changed in rural areas, while it increased in urban areas.

  • Racial poverty ordering remains fully robust, showing the persistence of the apartheid legacy. (p. 41)

    We see clear poverty dominance across population groups in the order of African, Coloured, Indian/Asian and White. This shows that the legacy of Apartheid is strongly persistent even in 2008.

  • Grants now supply two-thirds of bottom-quintile income. (p. 62)

    It is striking that fully two-thirds of income to the bottom quintile comes from social assistance grants

  • The apartheid-era old-age pension was racially discriminatory, with a large white-African gap in 1970. (p. 60)

    In 1970, the size of the State Old Age Pension for a white person was more than seven times the value of the pension for an African.