What Does Current Research Reveal about Income Inequality in South Africa?

The REDI3x3 project, managed by SALDRU since 2012, hosted a workshop on 13 November to share findings from a substantial amount of recent research on earnings inequality.

The programme included a wide range of topics covering various aspects of income inequality as well as a useful guide to the key issues covered by the speakers. Download it here (PDF).

Overall, the prognosis for reducing income inequality in South Africa doesn’t look good.

High incomes matter a lot for inequality, but are badly captured in surveys, Martin Wittenberg of DataFirst told the workshop. Rich people are coy about their incomes, he said, with the richest underreporting the most on their taxes, for example, in the Quarterly Labour Force Survey.

This point was reinforced in a separate argument made by Rulof Burger from the Department of Economics at Stellenbosch University who contended that there’s no downward mobility for rich households in South Africa.

SALDRU’s director, Murray Leibbrandt, argued that a focus on the labour market is crucial. Earnings of parents and their children in South Africa show that if parents are at the bottom of the earnings distribution, their children have a 95% chance of getting stuck there. Similarly, children of rich parents tend to remain at the upper end of the earnings distribution. Leibbrandt said that 40% of transmitted intergenerational inequality is due to the quality of South Africa’s education.

The research reveals that measures to reduce income inequality are ineffective.

Ben Stanwix of the Development Policy Research Unit said non-compliance with sectoral determination minimum wages is high. For example, 40% of domestic workers reported earning less than the sectoral minimum wage in 2014.

Talking about the agricultural sector, Vimal Ranchhod, SALDRU’s theme head for inequality reported that the minimum wage went up by 52% in 2013. However, wages in agriculture did not keep pace due to non-compliance.

According to Stanwix, overall 40-50% of workers in South Africa (across all sectors) are earning below the R20/hour minimum wage that will take effect on 1 May 2018.

Dip into the REDI3x3 working paper repository to find some of the papers discussed at this workshop. Look out for presentations from this workshop that will be posted on the REDI3x3 website in the next few days.