Ingrid Woolard, Rebecca Metz, Gabriela Inchauste, Nora Lustig and Mashekwa Maboshe
South Africa has evidently made limited progress in reducing income inequality since the end of apartheid. In fact, since 1994 the Gini coefficient has increased somewhat to 0.69 in 2011. South Africa’s levels of inequality are even greater than those in Brazil, another highly unequal country. For instance, 61.3% of aggregate consumption expenditure comes from the richest 20% of South Africans, compared to 55.7% in Brazil (StatsSA 2014; SEDLAC).
In a country as unequal as South Africa, it is critical to determine the progressiveness of the major fiscal policy instruments – i.e. to establish whether government spending and taxation separately and together are ameliorating or worsening the degree of inequality that would otherwise exist between individuals.
In order to make this determination one must ask two critical questions. First, who bears more of the burden of taxation and who benefits relatively more from the various forms of social spending – the poor, those in the middle or the rich? Secondly, what is the combined impact of taxes and spending patterns on inequality?
This article explores these questions by reporting on work by an international group of researchers (Inchauste et al. 2015) who studied these questions using the Commitment to Equity methodology developed by Lustig (Lustig & Higgins 2013). We also comment on the implications of their findings for policy.