12 october 2010 livelihoods and care: synergies between social grants and employment programmes...

12 October 2010

Livelihoods 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:



Total 2004-2007:



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





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





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

contact details

tel: 27-11-403-2122 I fax: 27-11-403-1948 I e-mail: [email protected]

6th Floor, COSATU House, Leyds St, I Braamfontein I Johannesburg

PO Box 5665 I Johannesburg I 2000

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12 october 2010 livelihoods and care: synergies between social grants and employment programmes...

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