Transcript Bridging the Widening Gap: Poverty Alleviation in South Africa

Evidence based
employment scenarios &
integrated development
policies
Presentation to UNDP Policy Dialogue on long term social
protection for inclusive growth
by Dr. Miriam Altman
Commissioner – National Planning Commission
& Executive Director – Human Sciences Research Council
[email protected]
11 October 2010
SA context of extreme
structural misalignments
• Highest open unemployment in the world
• Very low rates of economic participation
• Low pay relative to cost of living
• Deep and extensive poverty – even in households
with working person (‘working poverty’)
• Minerals economy dynamics
• In 2004, Government committed to halving the rate
of unemployment and poverty by 2014
Employment scenarios
• We ask: what are the possible routes to cutting
unemployment and poverty in half on a sustainable basis?
• ‘Evidence based employment scenarios’ process
established in 2005
• Generates the evidence about the pieces in the puzzle and how
they fit together
• Draws together top decision makers from business, labour and
government, plus experts into dialogue, involved from beginning to
end
• The scenarios are independent of the policy process, but our other
work is closely linked to policy formulation
• Information exchange through networked hub and spokes model
Key questions
• What is the ultimate target – what does halving
unemployment and poverty actually mean?
• How would we know if we were meaningfully moving
towards this target?
• Where might jobs be created?
• If unemployment were halved, would poverty also be
halved?
• What is the system of social protection that ensures
working people can live decently?
• What are the choices, costs and trade-offs are
associated with different paths?
First step – define the target
what does ‘halving unemployment’ mean?
 Halving unemployment between 2004 – 2014 means:
 Unemployment falls from 28% in 2004 to 14% in 2014
 Goal assumes that employment should be sustainable so that
can achieve full employment by 2024
 Number of jobs needed =
 5 million net new jobs needed 2004-2014 to halve strict
unemployment
 Approx 40% of population fall below proposed poverty line of R
430 pp pm (2006). Using this definition, halving poverty would
mean 20% of population fall below this line by 2014.
Identifying sectors where jobs created
•
•
•
•
•
•
•
Agriculture & Mining
Manufacturing
Skill intensive services
Labour intensive services
Survivalist informal activity
Public service
Public works & special employment programmes
3 employment scenarios
• Critical differentiators
• Different rates and types of economic growth
• Extent that globally integrated dynamic industries expand
• Lower growth path relies on minerals exports, and jobs created in
low paid services
• Policies that underpin these different rates & types of growth,
such as investments in network infrastructure or public works
• Faster growth earns more tax revenue, and has less need for
state-based job creation & poverty interventions
• Slower growth requires substantial intervention in job creation,
and poverty alleviation as average wages are lower. But there is
less tax revenue available.
Earnings from work
the challenge of working poverty
 2/3 of working people live in households that skate below or near
the poverty line in 2004.
 High rate of working poverty means that halving unemployment will
not automatically translate into halving poverty unless:
 New employment opportunities provide a decent income
 Cost of living becomes more affordable
 System of social protection deepens
The employment scenarios show that even if unemployment halved, 35% of the
population would still fall below the poverty line in the absence of grants.
Social grants would further reduce this figure to 30%
Wage distribution under
3 scenarios
2004 (1)
Remuneration per
month
2024
Scenario 1
slow down
Scenario 2:
domestic
orientation (2)
Scenario 3:
dynamic
products in
trade
orientation
(2)
<R1000
R1000 – R2500
>R2500
In 2004 Rand
47.9%
59.4%
52.4%
45.4%
17.9%
14.0%
16.1%
17.8%
34.0%
27.0%
31.8%
36.9%
Social protection
• SA context = high cost of living and low &
precarious earnings from work
• Sustainable development path will require
social protection policy that aims to:
• Raise incomes
• Reduce cost of living
• Reduce risk (so that crises not disabling)
Some questions about enabling environment
• Is it possible for lower income groups to assemble reasonable
standard of living, based on:
•
•
Cost of living – esp food
•
Money coming in
•
Social contribution/in-kind contributions (eg free educ and health, etc)
Are markets and services functional to economic participation?
•
Eg is cost and time associated with travel between different potential
sources of (dispersed) employment or business functional to
participation? (ie job search, taking new job where-ever found, getting
goods to market or inputs?)
• Are there substantial resources that might be under-utilized –
where bringing them into production, or raising their output
could have contribution to output & employment?…..
•
Eg is land fully utilised even for subsistence production?; are logistics at
globally competitive standard?
Weighing up the resources for
special interventions and reforms
Cost implications of
reducing both UE & Poverty
•
Any large additional choices to make up for shortfall in employment or reduce
poverty, alongside market based growth will be costly
•
For example:
•
Large expansion to EPWP
• will need to reach 1.5 million people per year or more
•
Expanded public service
• Scale and salary levels
•
•
Minimum wages &/or wage subsidies
•
Dramatic expansion in bursary programmes for post school learning
•
Dramatically expanded support to agriculture as livelihood support
•
Social grants
•
Improved access to health and retirement funds and services
•
Substantial investments in public transport systems
Alongside other major investments in social and economic infrastructure and
institutions – energy, transport, education, health, etc
(crude) Indicative public budgets
at different growth rates
2006/7
GDP growth rate
2013/4
2.5%
3.3%
special int
3.3%
4.5%
Non-interest spending (R bn)
R 473.8
R 587.7
R 628.8
R 628.8
R 695.0
less Personnel expend (Rbn)
R 172.3
R 230.6
R 241.6
R 241.6
R 260.4
Non-personnel expenditure
R 301.5
R 357.1
R 387.1
R 387.1
R 434.6
R 2.7
R 59.4
R 45.3
R 28.0
R 27.2
R 298.8
R 297.7
R 341.8
R 407.4
R 407.4
3.0
2.3
1.5
1.4
less EPWP
Remaining amount available for other
public spending
Number of EPWP jobs (mn)
Expenditure on EPWP in 2006/7 is author's estimate. It includes only labour and admin costs, and not cost of infrastructure
Other major expenditure items:
Assumes:
• non-interest spending grows 25% faster than GDP
• social grants
• social infrastructure backlog
• economic infrastructure (eg eskom)
• EPWP is only opportunity to address residual unemployed versus combination of special
interventions
• no change in borrowing