12 October 2010Livelihoods and Care: Synergies between

Social Grants and Employment Programmes

National Labour and Economic Development Institute

Context and Background• SA labour market and poverty indicators remain

dismal:– Unemployment rate (narrow) have never dropped below

the 20% over the last 12 years and depending on the definition UR is now at 25% of as high as 37%

– According to Bhorat and Van der Westhuizen:• Using a R323 poverty line (2000 prices) aggregate

poverty declined, from 52.5 percent in 1995 to 49 percent in 2005

• Using a lower poverty line of R174 (2000 prices) the decline was more than seven percentage points, from 31 percent to 24 percent – suggesting that those in deeper poverty experienced a relatively larger improvement in their welfare

– Rising inequality using different measures

Achieving its Aims but Poor Policy Coordination?

• Target well achieved • However limited benefits

due to:– No uniformed wage

structure, though this is being achieved

– Significant budget impetus needed to upscale and meet the 4.5 million target

– Move beyond the shorter working period

– Poor training outcomes• 60% of participants in

households have access to social grants too

• Social grants extended to more than 13 million recipients, 3,5% of GDP or 13% of total expenditure

• High take up rate for CSG and OAP

• Significant contributor towards reducing head count poverty

• However, Social Security measures fail to target structural unemployed

• Very little coordination with public employment programmes

Impact of Social Security and Public Employment interventions

• 60% of survey respondents in CASE data set receive at least one form of social grant in addition to their EPWP wage, this means that;– Positive impact for results where EPWP is effected– Access to social grants during EPWP participation significantly

reduces the chance that a household will remain in poverty relative to EPWP participants who are without access to social grants

– Though stand-alone provision of social grants also reduces poverty, the impact is accelerated if combined with EPWP participation however public employment programmes have more impact

– Male and coloured participants are significantly more likely to escape poverty once entering the EPWP than female and African participants

– If training was effective then it would increase the person’s ability to compete in the labour market and thus have more enduring impacts on poverty reduction

Years Sector

Infrastructure Economic Environment & Culture

Social Total

2004 – 2005:

Monthly wage (Rand) 1,058 850 693 671 965

Job duration (months) 5.8 0.7 3.3 14.3a 4.9

2005 – 2006:

Monthly wage (Rand) 970 575 770 657 839

Job duration (months) 3.1 1.5 3.5 7.1 3.6

2006 – 2007:

Monthly wage (Rand) 1,083 806 822 691 892

Job duration (months) 2.8 4.2 2.5 7.5 3.2

Total 2004-2007:

Monthly wage (Rand) 1,044 784 772 679 900

Job duration (months) 3.8 2.1 3.0 7.5 3.8

Wages and job duration in the EPWP by sector, 2004-2007

Source: EPWP (2005, 2006, 2007).

Poverty Impact

• Mitchell’s analysis shows that;– Increasing the number of social grant recipients and

EPWP participants suggest households close to the MLL poverty line

– EPWP contribution reduces the probality of households being in poverty

– EPWP with social grants reduces the probality of households in poverty just significantly but more so when other income is considered

– Access to training during EPWP did not have an impact on poverty

– Males have a greater chances of reducing poverty than females

Improving Wage Setting• Social Grants are close to saturation levels and will

continue to make poverty impacts but not as significant as public employment programmes.

• However this will require scale up that sees;– Labour intensive employment will be required and is requirement

to access fiscal incentive– Wage standardization is being implemented but require to move

to the upper band wage rate of R100 per day, supported by the national budget

– Transitional interventions that support employees in ECD and HCBC to move into both public and private sector. This could significantly improve minimum wages, skills and longer employment contracts

– Training and skills development must provide for better outcomes to improve formal labour absorption

Some Income Scenarios…Lets set a few assumptions:

1. We set a poverty line of R328 for an average household size of 5 = R1640 ($234) per household income

2. Based on EPWP data there is on average 2 children under the age of 18 per household. This would allow for access to a CSG: 2 x R240 = R480 ($68) per household

3. Our 3rd assumption is an earnings level set at three different EPWP wage setting levels of R60, R75 and R100 per day

Scenario 1 Scenario 2 Scenario 3

EPWP/CWP income wage of R60 is equivalent to R1260 ($180) per month

Assuming there are two children per EPWP household, the household could receive an additional R480 ($68) income

If we use our assumption that a poverty line is set at R1640 ($234) per household

THUSWith a combined household

income of R1740 ($248) this could be lead to an income level above the assumed poverty line for EPWP recipients

EPWP/CWP income wage of R75 is equivalent to R1575 ($225) per month

Assuming there are two children per EPWP household, the household could receive an additional R480 ($68) income

If we use our assumption that a poverty line is set at R1640 ($234) per household

THUSWith a combined household

income of R2055 ($294) this could be lead to an income level significantly above the assumed poverty line for EPWP recipients

EPWP/CWP income wage of R100 is equivalent to R2100 ($300) per month

Assuming there are two children per EPWP household, the household could receive an additional R480 ($68) income

If we use our assumption that a poverty line is set at R1640 ($234) per household

THUSWith a combined household

income of R2580 ($396) this could be lead to an income level that is extensively above the assumed poverty line for EPWP recipients

What are the Implications?

• EPWP/CWP (employment opportunities – guaranteed employment)combined with cash transfer can significantly increase household income above our conservative poverty line

• Could lead to considerable reduction in overall household poverty in both absolute and relative terms

• EPWP wages for scenario 2 and 3 without the cash transfers will be on par or even higher than those in low wage formal sector employment– Agriculture: R1316.69 as at 1 March 2010– Domestic Services: R1442.86 1 December 2009

• This could lead to a substitution effect, which frankly is not a bad idea given low wages in these two sectors

Conclusions• Given the various studies public employment programmes

can have a greater impact on reducing poverty and improving livelihoods and care

• But complementarities and improved coordination of cash transfer and public employment to households must improve and improve poverty levels

• Significant up-scaling will be required in all pubic employment programmes

• The role of the state as an employee of last resort must be critical area of focus – in particular the need for increasing formal public sector employment at a transitional levels – engagement with unions would be crucial

• Training and wage setting at correct poverty levels are important and will must require social partnership agreement

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National Labour and Economic Development Institute

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