Finding the answers to halving unemployment and poverty

In other parts of this Bulletin we have spelt out the high levels of poverty and unemployment in this country. In 2003 at the Growth and Development Summit, government committed itself to halve poverty and unemployment by 2014.

The Millennium Development Goals which countries agreed on in 2000 also have this as one of their targets. But just how can this be done in South Africa?

There are many ideas coming forward. Just two of these studies are summarised in this article. Mirriam Altman from the Human Sciences Research Council and Asghar Adelzadeh who did a study for Oxfam have both put forward different scenarios to achieve these targets.

What is needed?Both studies agree that to halve unemployment the economy will need to create between 400 000 and 500 000 new jobs each year until 2014 – that's one and a half times the number of jobs that were created between 1995 and 2004! Creating jobs does not automatically draw people out of poverty.
We know that in this country we have what are called "the working poor" – people that work but who are still poor.

Both studies propose that social grants must go wider than they do currently and that there should be more subsidies for the poor for both essential goods and services (like water, electricity, transport).

"No silver bullet" says HSRC"All our research shows that there will be no 'silver bullet'," says the HSRC study. "No one intervention will generate "a million jobs".

What will see employment rising is creating linkages, getting one part of the economy talking to another, "improving the general business environment".

The HSRC explores three different scenarios to try and see what combinations of policies are needed to achieve the target of halving the unemployment and poverty rates.

In all three scenarios it uses Expanded Public Works Programmes (EPWP) to mop up those that don’t have jobs. It shows that the lower the GDP growth rate, the more jobs government would have to provide through the EPWP.

So with a 3% GDP growth rate, 2.8 million people would need EPWP jobs. This would leave "very little other budget for public spending" and threaten the long term sustainability of the growth of the economy.

Scenario 3 is the most desirable but it assumes the GDP growth rate would have to grow at 6% – maybe a tall order considering the economy's current slow-down! It also assumes that the public sector becomes one of the major employers.

Even with all these scenarios, the HSRC sees little prospect in reducing poverty by half unless government supplements low wage earners with social grants, improves service delivery, reduces prices for goods and services bought by the poor and/or gives them access to a garden.

Scenario 1

Scenario 2

Scenario 3

GDP growth

3%

4,5%

6%

Employment growth

* 20% of the jobs are in informal sector, domestic work, subsistence agriculture * 17 % of the jobs are in Expanded public works programmes (EPWP);* 16,7% in retail, personal services* 13,2% in public sector* 9,5% in manufacturing

* 21% of the jobs are in informal sector, domestic work, subsistence agriculture* 18,2% of jobs in retail, personal services* 14,5% in public sector* 10% in manufacturing* 8,9% of the jobs are in Expanded public works programmes;

* 21,5% of the jobs are in informal sector, domestic work, subsistence agriculture* 17,9% in retail, personal services* 16% in the public service* 11,4% in manufacturing* 3,5% in EPWP

Number of jobs in EPWP

2.8 million

1.5 million

579 000

Oxfam – government in the driving seatThe Oxfam study also develops a number of different scenarios but only one of them succeeds in halving unemployment and poverty by 2014 (2015).

Its winning scenario for halving unemployment and poverty assumes the following:* an annual real growth rate of 5% between 2007 and 2015* the creation of 3,7 million new jobs during that period (ie about 411 000 per annum)* that new jobs will benefit the poor more than the non-poor* the extension of the child support grant to poor children aged 14-17* the introduction of a new social grant for unemployed adults (initial grant of R500 per month)* a real annual increase in the value of all grants by 2%* more subsidies for transport and essential services (ie water etc), food aid for poor people.

These transfers should be the equivalent of R20 billion in the first year and then increase annually by 2%.All these measures assume that the state takes on a much more developmental role.

With this changed role government should make bold moves in the following areas:* its macro-economic policies* its employment generation policies* its trade and industrial policy* its social security system

Changes it should make to macro-economic policyAdelzadeh argues that government should adopt a "pro-poor fiscal policy".

However this will require extensive funds on the part of government. He says that government can either finance this by increasing its revenue and/or use the fiscal deficit.

He favours government increasing its revenue through introducing a "strong progressive income and company tax, value added tax and wealth tax system" because it will reduce inequality at the same time.

Those high-income earners will benefit in other ways for example from the improved infrastructure and better education of their workforce and subsequent productivity increases.He sees no problem with inc

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Numsa News