South African Income Inequality Persists

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SEATTLE, Washington — It has been over a quarter of a century since the historic 1994 elections in South Africa ended the injustice of apartheid. Those elections resulted in Nelson Mandela, the first black South African president, and his African National Congress (ANC) winning political power. Remarkably, South African income inequality has deepened rather than dissipated in the time since. This inequality has grown so alarmingly that South Africa is now considered the most unequal country in the world.

More for the Few, Less for the Many

The Gini coefficient expresses a nation’s entire income distribution into a single value between 0 and 100 with greater values representing less equal societies. South Africa’s Gini coefficient increased from 57.80 in 2000 to 63 by 2014. In 2018, the World Bank published a comprehensive study that examined South African income inequality, its presentation and its unique driving forces. Its findings illustrate that progress has lagged far behind expectations despite the ANC’s ambitions of eliminating poverty.

During apartheid, black South Africans were segregated along ethnic lines into areas called “homelands,” These areas featured poor access to public services and dilapidated infrastructure. Today South Africa’s 20 poorest municipalities are within the provinces of Eastern Cape, Limpopo and KwaZulu-Natal. This is also where the largest densities of these homelands were during apartheid. This demonstrates that spatial patterns of poverty have not shifted over time. Inequalities are most startling in the very spaces where apartheid was most evident.

Employment in South Africa

South Africa’s labor market is split into two ever polarizing groups. One group, the predominantly white moneyed class, holds the few high paying jobs within specialized sectors of the economy. The other group, the remainder of society, works primarily in the service industry facing greater economic turmoil and job insecurity. In fact, White South Africans earn three times the wages of black South Africans despite the fact that black South Africans make up 80 percent of the population.

In South Africa, “the bottom 50 percent of households account for only 8 percent of incomes, 5 percent of asset values and 4 percent of net wealth.” Meanwhile, “the top 10 percent of households account for 55 percent of household incomes, 69 percent of total household asset values and 71 percent of household net wealth.” In 2015, 47 percent of households headed by black South Africans were living below the poverty line while fewer than 1 percent of households headed by white South Africans experienced poverty.

In 2015, 25.1 percent of the South African workforce was unemployed. This number increased to 27.5 percent by the third quarter of 2017. When adjusted for race, these figures vary drastically, depicting the contemporary wounds of South Africa’s apartheid past. Unemployment among black South Africans stands at almost 30 percent while only being between 5 and 6 percent for white South Africans. In 2017, more than 30 percent of South Africans were unemployed.

Social Assistance

Though South African income inequality remains stark, there are notable glimmers of hope for South Africa’s future. Social assistance has proven incredibly effective in reducing South African poverty. Government aid rendered in 2015 reduced the poverty rate by 7.9 percent and the poverty gap by 29.5 percent. These assistance packages were given out as grants to working-class South African families. They were primarily used to improve healthcare and education, which results in long-term poverty reduction.

Without social assistance, South Africa’s already dangerously high Gini coefficient would increase by 10 percent according to estimates. Most countries’ Gini coefficients are not nearly as impacted by increases or decreases in social assistance. This shows that South Africa could be particularly adept at lifting its citizens out of poverty, particularly the most vulnerable. Expanding, securing and extending the reach of these programs in meaningful ways would allow for an even greater number of South Africans to be lifted out of poverty. Placing a greater portion of public resources into the areas where these grants are most commonly used, healthcare and education, is important as well.

South African Workers’ Rights

Unions have long played an emancipatory role in South Africa’s history. Black South Africans were denied the right to collectively bargain until the Industrial Conciliation Act of 1924 was amended in 1979. This shift represented a change in South African workers’ rights. South African trade unions went from having a meager voice in political affairs to acting as the primary vehicle of South Africa’s working class in the battle against apartheid. By the late 80s, these trade unions were successfully lobbying for the creation of a national bargaining council that centralized and strengthened bargaining rights. 

Across the entirety of the income distribution and within every sector, public and private, unionized workers earn more than double non-unionized workers in South Africa. Even when controlling for other factors, union jobs still were found to yield incomes 42-49 percent higher than wages for non-unionized members of the workforce. This gap in wages is most apparent within the middle 60 percent of the income distribution.

Within that group of workers, the largest gap exists between unionized workers in the public sector, who earn the most, and non-unionized workers within the private sector, who earn by far the least. Those non-unionized workers in the private sector have lost the most in the labor market since the fall of apartheid and represent the bulk of the dissipating South African middle class. Private-sector unionization has trended downward since 1997, indicating that shriveling worker rights within the private sector has been a key driver in the growth and persistence of South African income inequality. 

Reversing the trend of dissipating bargaining rights within South Africa’s private sector and bolstering union membership will drive up working-class wages and enhance the job security of existing members of the workforce. This will provide a more stable and immediate path toward an equitable society than solely relying on job creation. 

Political Change

Former ANC president, Jacob Zuma, was forced to resign in 2018 amid multiple allegations of corruption. Capitalizing on growing dissatisfaction with the ANC, the Economic Freedom Fighters (EFF) raised their percentage of the electoral vote to 10.79 percent in the 2019 elections from 6.35 percent just five years earlier. The growing appeal of this political movement’s forward-thinking agenda represents a desire among alienated members of the South African working class to once again push the country toward a more meritocratic future.

South Africa’s ability to reverse its apartheid legacy of racial and economic inequality will rely upon continued strengthening and expansion of social equity programs, growing the membership and organizational ability of its unions – particularly within the private sector – and forging meaningful and equitable trade associations with the international community.

Perry Stone Budd
Photo: Flickr

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