the social and economic impact of south africa’s social grants...–breaking the poverty trap...
TRANSCRIPT
The Social and Economic Impact of
South Africa’s Social Grants
18 November 2007
Michael Samson
Economic
Policy
Research
Institute
Growing Up Free From Poverty
(GUFFP) Seminar
at the
Overseas Development Institute
(ODI)
London
Questions regarding social
transfers
�Targeting
�Conditionality
�Dependency and perverse incentives
�Sustainability
Question #1: Targeting
�Rationale: economy
�Costs
– distortions, perverse incentives and poverty traps
– unnecessary administrative and private costs
– social costs (cohesion)
– stigma
– political costs (programmes for the poor)
– often exclude the poorest
�Targeting may be a false economy
The poverty-reducing impact of
social transfers in South Africa
67%
48%
37%
21%
0% 20% 40% 60% 80%
Destitution gap
Poverty gap
Destitution headcount
Poverty headcount
SOURCE: STATISTICS SOUTH AFRICA (GHS 2005, I&E 2000) AND EPRI
cumulative proportion of sample
0 25% 50% 75% 100%
0
25%
50%
75%
100%
cumulative proportion of income
Lorenz curve without transfers
Lorenz curve
with transfers
SOURCE: EPRI
South Africa’s social grants reduce
inequality substantially
cumulative proportion of sample
0 25%
0
25%cumulative proportion of income
SOURCE: EPRI
The distribution of social benefits
in South Africa
SOURCE: South African National Treasury
and Statistics South Africa
Measuring coverage and efficiency
0
20
40
60
80
100
type I type II
percentage (%)
2004
2004
2000
2000
Exclusion
error
Inclusion
error
SOURCE: Statistics South Africa I&E2000, LFS2004, and EPRI calculations
Question #2: Conditionality
�Rationale: long term poverty reduction
�Ideology
�Reality
– compromise the poverty reduction objective
– deprive the poor of freedom to choose appropriate
services — and to freely make decisions to
improve household welfare
– can be expensive, inflexible, and inefficient — in
the worst of cases, screen out the poorest
Social impact indicators
�Education
– School enrolments
– School attendance
– School performance
�Health and nutrition
– Stunting
– Wasting
– Reported hunger
– Expenditure on food
– Diversity of food consumption
�Rate of return analysis
�Ability to search for employment
– conventional wisdom and dependency
– evidence from South Africa (and elsewhere)
�Ability to find a job
– labour productivity
– breaking the poverty trap
�Bolster economic power in negotiating decent
work
Question #3: Dependency
Impact of South Africa’s Social Pension on adult labor force participation
SOURCE: Statistics South Africa Labor Force Surveys and EPRI calculations
Household
does not
receive
social
pension
in 2004
Household
receives
social
pension
in 2004
Improvement
associated
with social
pension
Probability that a poor adult
of working age in 2005 will:
Find employment 7% 9% 2%
Actively look for work 13% 15% 2%
NOTE: Sample includes working age adults (older than 16) in households in the lowest income
quintile but with no working individuals in September 2004.
Impact of South Africa’s Social Pension on adult labor force participation
SOURCE: Statistics South Africa Labor Force Surveys and EPRI calculations
Household
does not
receive
social
pension
in 2004
Household
receives
social
pension
in 2004
Improvement
associated
with social
pension
Probability that a poor adult
of working age in 2005 will:
Find employment 7% 9% 2%
Actively look for work 13% 15% 2%
NOTE: Sample includes working age adults (older than 16) in households in the lowest income
quintile but with no working individuals in September 2004.
Social grants are associated with improved labour market activity
0%
10%
20%
30%
40%
50%
60%
70%
Out of LF Unemp., no
search
Unemp.,
searching
Employed
Labor force status, March 2005
CSG households Non-CSG households
n=3462 n=1795
Question #4: Sustainability
�Social transfers must be financed, and the costs can be substantial--up to 3% of national income
�Economic growth and the government’s available budget depend on each other
�Social transfers conserve fiscal resources in important ways
�Social transfers can support a virtuous circle of growth, greater affordability and sustainability
0%
2%
4%
6%
8%
2004 2006 2008 2010 2012 2014 2016 2018 2020
economic growth social grant spending (% of GDP) poverty gap (% of GDP)
poverty gapeconomic growth
social grant spending
Social grants produce social capital, which
promotes growth and reduces poverty in a
mutually reinforcing manner
Gini coefficients in 20 of the most
unequal countries of the world