Employment, Income Distribution and Inclusive Growth
The Research Project on Employment, Income Distribution and Inclusive Growth (REDI) is a national research programme aimed at deepening understanding of the dynamics of employment, incomes and economic trends. By focusing on the interconnections between these three areas, the project seeks to contribute to policy reforms and development strategies that will address South Africa's unemployment, inequality and poverty challenges.
The research project is designed to promote dialogue across disciplines and paradigms, and to forge a stronger engagement between research and policy making. By generating an independent, rich and nuanced knowledge base and expert network, it intends to contribute to coordinated, consistent and effective policies directed to these three critical problem areas.
The project is a multi-year collaborative, independent research initiative funded by the National Treasury and managed by SALDRU in partnership with the Department of Economics of the University of the Free State. Collaboration with researchers at other universities and research entities and engagement with diverse perspectives on the project's focus areas are key objectives of the initiative.
Project Director: Professor Murray Leibbrandt, Director of SALDRU at the University of Cape Town
Research Coordinator: Professor Frederick Fourie, University of the Free State Economics Department.
Guidance and oversight is provided by a Steering Committee including representatives from the academic and policy research communities and a number of government departments. The funding and governance arrangements provide for an arms-length relationship between the National Treasury (as project sponsor) and participating research teams. While contributing to the formulation of the project's scope and research questions, the Steering Committee is not responsible for research processes or findings.
The project seeks to advance an integrated response to unemployment, inequality and poverty, building on both South African research and experience and international evidence on the challenges of employment, growth and distribution, and associated policy options.
In developing a better understanding of growth and distribution dynamics, the project aims to bring together complementary and sometimes competing perspectives and methodologies – recognizing both the complexity and the interconnectedness of social and economic trends. The project seeks to articulate a multi-disciplinary framework for understanding these dynamics, and will provide opportunities for engagement between the research community, policy advisors and civil society stakeholders.
Internationally, the global economic crisis has been accompanied by renewed interest in distributional issues, including widening inequality over the past thirty years within many countries alongside convergence in cross-country incomes and living standards. Comparative international experience in adapting to changed economic conditions and protecting jobs and livelihoods has contributed to an active debate about employment, growth and income security policies.
While global developments have impacted on South Africa, there are also deep-rooted features of the structure and history of our economy that have shaped current trends. Government policies, market forces and institutional factors interact in complex ways. Short-term trends can mask longer term trajectories, and well-intentioned policy reforms can have unintended disruptive or damaging long-term consequences. The research project aims to improve understanding of the impact of international trends and domestic structural features on these connected patterns of growth, development and distribution, as a contribution to public discourse and policy making. It will seek to sharpen understanding of the impact of policies and government programmes on employment, income distribution and inclusive growth.
Drawing on a series of discussions hosted by SALDRU in 2011, an integrated unemployment research framework developed by Professor Fourie provides a constructive point of departure for the research project. This framework identified the fragmentation of the unemployment debate into separate discourses or silos – macroeconomic, labour economic and development/poverty analysis – as a major cause of many knowledge gaps, probably also contributing to the failure of policies to make significant inroads into unemployment, inequality and poverty. Such fragmentation also affects the debate on income inequality and inclusive growth.
A related problem is a reluctance explicitly to incorporate the full spectrum of economic activities and livelihoods, i.e. the formal sector, the informal economy and survivalist/subsistence activities, in research and policy analysis. Our policy research needs to recognize and be grounded in the diversity and complexity of the South African context.
The research will, accordingly, have a strong focus on generating cross-discourse engagements, drawing on insights from several discourses, methodologies, data sources, sub-disciplines and disciplines – including labour economics, macroeconomics, development economics and poverty analysis, sociology, political science and legal studies – thereby aiming to generate a broad-based and integrated knowledge base to underpin consistent and richly-informed policy.
The project aims to inspire and develop a focused community of researchers working in a structured programme of research in the three focus areas. It will involve researchers and research teams from an inclusive network of South African universities and research entities. Through this inclusive approach it hopes to:
- Involve a diversity of South Africa's established researchers on labour markets, inequality, poverty, development, growth and social policy
- Support post-graduate work in the focus areas
- Build the capacity of students and researchers from previously dis-advantaged communities.
Another explicit aim is to improve public understanding of, and public discourse on, these complex problems. Critical debate will be pro-actively stimulated through the effective dissemination of results and the provision of public forums for informed and open debate through publications (working papers, newsletters, briefs, etc.), an online forum, workshops, seminars, conferences and books.
Project Director: Prof Murray Leibbrandt, Director of SALDRU, School of Economics, University of Cape Town
Project Research Coordinator: Prof Frederick Fourie, Research Fellow, Department of Economics, University of Free State
Convenor of Focus Area 1: Unemployment and employment
Frederick Fourie is Professor and Senior Research Fellow in the Department of Economics at the University of the Free State. He is a graduate of the University of the Free State and obtained a PhD in Economics from Harvard University in 1981. He was appointed professor of Economics at the UFS at the age of 29 in 1982 and distinguished professor in 1998; he has published more than 50 scientific articles in accredited journals on a wide range of topics. In the1980s and 1990s he published pioneering research on economic concentration and competition policy in South Africa. He has taught macroeconomics, applied microeconomics and competition policy, econometrics, public economics and fiscal policy, methodology and philosophy of economics, and political economy, and has authored a widely used macroeconomics textbook now in its 3rd edition.
From 1992 to 1995 he was the founder and part-time head of the Unit for Fiscal Analysis in the Department of Finance in Pretoria, tasked with establishing a professional research capacity in the Department (now the Treasury). He has been a policy consultant to the World Bank, the Department of Finance and the Department of Trade and Industry, and a member of the Strategic Management Team of the MEC for Finance of the Free State. He was a co-author of the policy document leading to the new Competition Act 1999 and was a member of the first Competition Tribunal. He became Rector and Vice-Chancellor of the University of the Free State on 1 January 2003. After stepping down as Vice-Chancellor at the end of 2008, he returned to academic life as a research fellow in the Department of Economics. He is currently also a Research Affiliate at the Southern Africa Labour and Development Research Unit (SALDRU) at the University of Cape Town (UCT), where he has been involved in research collaboration since 2011.
Currently his research focus is on unemployment in South Africa, in particular the need for an integrated approach to unemployment analysis and policy design, encompassing insights from labour economics, macroeconomics, development economics and poverty studies.
Convenor of Focus Area 2: Income Distribution
Murray Leibbrandt is a Professor in the School of Economics at the University of Cape Town and the Director of the Southern Africa Labour and Development Research Unit (SALDRU), and accredited research grouping at the University of Cape Town. He completed his PhD at Notre Dame University, and his research focuses on South African poverty‚ inequality and labour market dynamics using survey data and‚ in particular‚ panel data. He holds the DST-NRF SARChI Chair in Poverty and Inequality research, and is an IZA Research Fellow. Prof Leibbrandt is currently one of the Principal Investigators in the National Income Dynamics Study. He is a past president of the African Econometric Society and immediate past president of the Economic Society of South Africa.
Convenor of Focus Area 3: Inclusive Growth
Haroon Bhorat is a Professor of Economics and Director of the Development Policy Research Unit (DPRU) at the University of Cape Town, and holder of the DST-NRF SARChI Chair in Economic Growth, Poverty, and Inequality. He completed his PhD in Economics at Stellenbosch University. His research interests cover books on labour market and poverty issues in South Africa and has published more than 150 academic journal articles, chapters in books, and working papers. He has undertaken extensive work for numerous South African government departments, most notably the South African Department of Labour, the Presidency, and the National Treasury. He has served on a number of government research advisory panels and consults regulalry with international organisations such as the International Labour Organisation, World Bank, and the UN Development Programme. Professor Bhorat served as economic advisor to Presidents Thabo Mbeki and Kgalema Motlanthe, formally serving on the Presidential Economic Advisory panel. He is currently an advisor to the Minister of Finance.
Chairperson: Mr Andrew Donaldson, Deputy Director-General: Public Finance, National Treasury
- Dr. Neva Makgetla, Deputy Director-General, Department of Economic Development
- Mr Rudi Dicks, Director: NALEDI
- Prof Dori Posel, University of KwaZulu-Natal
- Prof Haroon Bhorat, University of Cape Town
- Prof Murray Leibbrandt, University of Cape Town (ex officio)
- Prof Frederick Fourie, University of the Free State (ex officio)
Focus Area 1: An integrated approach to unemployment and employment in South Africa
Convenor: Frederick Fourie
Aims of Focus Area 1
Focus Area 1 builds on a wide-ranging study of unemployment undertaken in 2011 and the work of a research group active for some months prior to the initiation of the project. The initial phase identified a list major gaps and research priorities, based on a consultative process involving an initial core group of participating researchers. This constituted the basis for a first call for expressions of interest to the core group noted above. This group will be expanded now that the project has been constituted.
The specific aims are:
- Integrate development and sustainable-livelihood perspectives with, and into, labour market analyses;
- Integrate such an 'integrated livelihood-labour package' into macroeconomic analyses; and
- Derive policy proposals based on such an integrated perspective on unemployment, inequality and poverty.
In particular, the following pertinent dimensions of employment and unemployment in the developing country context of South Africa need to be considered explicitly:
- The entire economy, not just the formal sector. This encompasses the full spectrum of livelihoods: from surviving off grants to rural and urban subsistence, to various types of informal economy employment and self-employ¬ment, to formal sector employment and self-employment.
- The complexity of 'access to labour markets' amidst segmentation and various entry and mobility barriers between segments.
- Marginalisation and the conditions of poverty which appear to constitute substantial discouragement factors as well as barriers to access and mobility.
- The complexity of labour demand and firm dynamics (including entry and exit) in a formal-plus-informal and multi-segment context.
- An appropriate labour market model for South Africa that explicitly engages with the developmental, multi-segment and multi-livelihoods contexts.
- Developing macroeconomic and growth models that incorporate the micro reality of segments and labour market mobility barriers.
- Giving content to 'inclusive growth' as both a process and an outcome involving linkages and transitions between segments (survivalist, subsistence, informal, formal), and both rural (farm and non-farm) and urban areas.
- Labour demand and firm behaviour in the formal and informal sectors, urban and rural, in various sectors of the economy.
- Livelihood, employment and (self-)employment strategies/potential (and barriers) in rural (farm and non-farm), peri-urban and urban areas
- Labour market dynamics and transitions between employment/livelihood states (subsistence, informal and formal) amidst segmentation and mobility barriers.
- Job search in a developing country, segmented-market and spectrum-of-livelihoods context: its nature, behavioural underpinnings, obstacles and facilitation.
- Skills-related barriers to employment and self-employment in the informal and formal sectors.
- A critical review of policy initiatives in the post-apartheid period with regard to employment generation and the persistence of unemployment.
- Evaluating the potential role of industrial and other policies to increase employment multipliers, labour-intensity and –absorption.
- Large infrastructure projects and employment.
- Land reform and employment.
- The optimal role of labour market regulation and other employment-related policies in the formal and informal economies.
- The impact of UIF, social grants and other household resources/transfers on livelihood strategies and on individual labour supply.
- Reforming the measurement of unemployment, underemployment, employment and related livelihood states.
Events under Focus Area 1
Information Economy Workshop | 3 & 5 July 2013
Focus Area 2: Income distribution in South Africa
Convenor: Murray Leibbrandt
Aims of Focus Area 2
The initial work programme of Focus Area 2 aims to build a community of researchers in the area of income distribution. It will be anchored around key participants in the national research community working on income distribution, followed by an inclusive process to identify other interested researchers, deepen the analysis of relevant data and evidence and expand the scope of investigation.
- Long-term trends in inequality using data from different income/expenditure and non-monetary sources. Do they tell the same story and what are their inter-relationships? What do we know about the top-end of the distribution?
- The drivers and determinants of earnings inequality and income inequality, including unemployment and employment and the degree of inclusivity of economic growth (in particular the process of output and income generation).
- The broadening of the tax base and what this (and other tax dimensions) has done to income distribution.
- Education, training and human capital determinants of income distribution.
- The distributional impacts of spending, social transfers and related policies over the post-apartheid period.
- Social mobility and intergenerational mobility in contemporary South Africa, including evidence from panel data.
- The relationships between social mobility dynamics and the distribution of income at any point in time.
- International trends in income distribution and to what extent and why South Africa differs from these international trends.
- Demographic trends, household structure and the distribution of income.
- Long term household wealth and income security.
- Developing new, improved databases for research in this area, for example an improved, consolidated data base from household surveys and labour market surveys to track, measure and compare changes in income distribution over time. Another possibility is to create, from anonymous tax and other official data, an individual income data set that is available to researchers in a secure data facility.
- Developing a dynamic income distribution simulation and projection model for South Africa; suitable for projecting income distribution trends and estimating the impact of economic growth, employment, public policy and fiscal measures on income distribution.
Each of these will represent a resource that will in due course become available to the community of researchers.
Income distribution research gaps identified and call for proposals issued
An outcome of the workshop held in March 2013 (details below) was the formulation of a document which identifies the gaps in research for this focus area, and the subsequent call for proposals which address these gaps. The document is available here. The call for proposals for this focus area is currently open, and interested researchers are encouraged to contact the focus area convener, Murray Leibbrandt with any questions in this regard.
Documentation and Papers
Comparing subjective and objective measures of poverty in South Africa by Dori Posel & Mike Rogan
Data infrastructure projects for the income distribution project by Martin Wittenberg
Income distribution focus areaby Vimal Ranchhod
Post-apartheid income and expenditure survey project by Morne Oosthuizen
Progress on the micro-simulation project by I. Woolard
Socio-economic policy research at Stellenbosch by Servaas van der Berg
Focus Area 3: Inclusive growth in South Africa
Convenor: Haroon Bhorat
Aims and tasks of Focus Area 3
The initial work programme of Focus Area 3 will be anchored around key participants in the national research community working on inclusive growth, followed by a process to identify possible other interested qualified researchers.
A first task for the group will be to develop a conceptual framework for defining and analysing inclusive growth as both an outcome and a process whereby increasing numbers of people participate in the growth process (in survivalist, informal and formal segments) and share equitably in the benefits of such growth.
Participating researchers will review existing research to identify and address gaps in our knowledge of the determinants ('drivers') of both the participative nature and distributional impact of economic growth and development, including household living conditions, education, health, social and economic participation and employment, livelihoods, ownership of private assets, work and social cohesion – leading to an identification of research priorities.
In addition, they will identify and assess issues relating to how social and economic policies impact on the degree of inclusivity of growth and development, including the effectiveness and outcomes of public spending programmes, social services, infrastructure investment and associated policy issues and fiscal considerations.
- Determining whether the distributional outcomes of growth are pro-poor, using growth incidence curves (GICs), also across sub-groups and labour market categories.
- The role of access to 'social' assets and (subsidised) services in attaining inclusive economic growth – i.e. changes in non-income welfare relating to household access to services and assets such as water, energy, telecommunications, transport, refuse removal, housing and sanitary services.
- The role of private asset ownership in inclusive growth – both growth outcomes in terms of the trend in private asset ownership, e.g. homes and financial assets (including employee share-ownership), as well as the growth process re the role of ownership in enabling economic participation (including the potential role of financial institutions in supporting such changes).
- Analysing how economic flows across age groups have changed in response to, inter alia, changes in social policy, economic circumstances and changing social norms, and what this says about the nature of economic growth in terms of employment, incomes, the expansion of social security, etc.
- The role of unemployment and employment in determining the degree of inclusivity of economic growth (in particular the process of output and income generation).
- The importance of linkages and transitions between survivalist, informal and formal segments for improving both participation and growth outcomes.
- Employment services, job search and public placement services.
- Wage and employment subsidies as elements in an economic inclusion and participation strategy.
- The role of small enterprise development and entrepreneurship in broadening economic participation.
- The role of product and factor market regulation as constraints and/or enablers of truly inclusive growth.
- Rural-urban migration, urbanisation and access to economic opportunities.
- Transport services (and subsidies), mobility and access to work opportunities.
- Links between education, training, labour market opportunities and economic participation.
- The impact of social conditions, crime and violence on participation and outcomes.
- Agriculture, land reform and rural development as elements of an inclusive growth strategy.
- Housing development, maintenance and upgrading, housing finance and housing market opportunities (including townships and rural villages or towns).
- Public procurement and the informal economy.
- Infrastructure investment, employment and the distribution of growth opportunities.
- Regional development, trade and inclusive growth.
- The impact of macroeconomic policy levers such as taxation, deficits, interest rates and exchange rates on inclusive growth processes and outcomes.
This research will be complemented by projects to generate better datasets (including accessing administrative data). One specific task that has been identified is the development of comprehensive income and expenditure data series. Similarly, the goal is to develop the application of 'new' methodologies, such as growth incidence curves and national transfer accounts, to measure the degree of inclusivity of growth. Such accounts allow cross-age-group analysis of economic flows to improve understanding of the distributional impact of economic growth. These and other data resources will be made available to the community of researchers.
Funding and incentivising research and capacity building
In keeping with the aim of supporting a broad community of researchers working on related issues, the research project will seek to build a network of research, rather than funding the full expenses of a limited number of specific projects. Funding will be available for incentive grants to encourage, and contribute to the costs of, research that addresses each focus area's identified research gaps and contributes to the associated policy debates.
Types of grants
The provisional incentive framework has the following elements:
- Incentive grants will take the form of a payment for a completed and finally (post peer review) accepted research paper based on an agreed research proposal. Payment can be in more than one tranche, and can be used by the researcher as she/ he sees fit (as own taxable income or to finance research expenses or assistants; the funding will be disbursed subject to the financial rules and requirements of the researcher's home institution).
- Scholarship grants are available primarily in the form of (one-off) top-ups for master's and doctoral students working in a team with a researcher-supervisor and producing at least one paper for master's students and at least two for doctoral students. For smaller centres, a limited number of scholarships with a higher value are available to help finance full-time PhDs. All scholarships will be administered through the relevant university financial aid offices.
- Special projects: Data infrastructure (referring to a basic resource created for use by a research community and others). A limited number of data projects will be funded, intended to broaden the data available to researchers on unemployment and employment, income distribution and distributional aspects of growth by improving current databases or generating new databases in key areas.
While these will be the main funding mechanisms, consideration will be given to alternative arrangements for projects with a unique scope and character, or where good circumstances warrant special provisions. Researchers are encouraged to source other funding to cover research expenses, but are cautioned that 'parallel funding' will not be supported, i.e. duplication of funding through similar or overlapping incentive awards for the same paper. Researchers are encouraged to advise the project team of relevant work that has been undertaken or is in progress, but the project will not finance or 'incentivise' research that is already largely completed.
Applications for research funding should in the first instance take the form of a two-to-three page research proposal which details:
- the topic
- focused research questions (with explicit reference to relevant sections of our gaps framework and approach)
- data and research methods
- expected outputs
- time-frame (8-12 months / 2 years / 3 years, say)
- sequencing and prioritisation (relative to a researcher's other submissions, if any)
- an indication of whether this is new or ongoing research
- other funding
- any other relevant information.
This will enable the project team to engage with a proposer on aspects of the proposal that may need further development (including alignment with the project gaps and topics) and to come to an agreement and contract.
For student scholarship grants the researcher-supervisor must provide similar information, as well as the student's personal particulars, academic status and record.
Researcher-supervisors are urged to try hard to find black students to be involved in this research area in this way, given the long-term capacity building objectives of the project, and to provide feedback on such efforts if not successful.
Applications can be submitted at any time, but prospective participants should first contact the Project Director or the Project Research Coordinator to discuss the matter. Persons currently outside any of the research groups should also submit information on their interests, competence, experience and track record (e.g. research output) in the relevant area.
Researchers who do not wish to make use of the incentive framework but would like to be an active member of a research group, are very much welcomed. We urge them to keep us informed of their work. With their permission we will inform the network of new relevant research and facilitate its inclusion in the debates. They would also be welcome to present papers at seminars and workshops of the project. As noted, building active research communities and a broad research dialogue in each of the three areas are amongst the main objectives of the project.
Additional capacity building
In addition to scholarships and incentive grants for black students and researchers, the research project will support workshops, training and seminar forums aimed at broadening participation in the research dialogue. In keeping with South Africa's broad-based participation and empowerment challenge, special attention will be given to encouraging and involve potential researchers from historically disadvantaged universities and communities in these activities.
Fourie, FCvN. 2011. The South African unemployment debate: three worlds, three discourses? Working Paper 63 (June), SALDRU, University of Cape Town.
Conference papers of participants
Fourie, FCvN (2012): The South African unemployment debate: three worlds, three discourses?(Revised version), paper presented at the Towards Carnegie 3 Conference, University of Cape Town, 4 September 2012.
Fourie, FCvN and Leibbrandt, M. (2012): Unemployment: State of knowledge, gaps and research priorities for an integrated approach, paper presented at the Towards Carnegie 3 Conference, University of Cape Town, 4 September 2012.