1. Department of Economics  Faculty of Economic and Management Sciences Economic and Development Problems in South Africa and Africa Poverty and Inequality in SA

2. Admin Van der Berg (2010) article Not all information is of equal value (!) 2

3. Money-metric vs multidimensional poverty Absolute vs Relative poverty Lorenz curves Gini coefficient Understand the nature of poverty/inequality in SA General knowledge of developing countries (TED video) 3 Aims for these lectures…

4. What is poverty? 4

5. What is poverty? How do we measure poverty? Why should we measure poverty? 5

6. Is Kaya poor? “Kaya, four, lives with her parents in a small apartment in Tokyo, Japan. Her bedroom is lined from floor to ceiling with clothes and dolls. Kaya’s mother makes all her dresses – Kaya has 30 dresses and coats, 30 pairs of shoes and numerous wigs. When she goes to school, she has to wear a school uniform. Her favourite foods are meat, potatoes, strawberries and peaches. She wants to be a cartoonist when she grows up.”

7. Is Indira poor? “Indira, seven, lives with her parents, brother and sister near Kathmandu in Nepal. Her house has only one room, with one bed and one mattress. At bedtime, the children share the mattress on the floor. Indira has worked at the local granite quarry since she was three. The family is very poor so everyone has to work. There are 150 other children working at the quarry. Indira works six hours a day and then helps her mother with household chores. She also attends school, 30 minutes’ walk away. Her favourite food is noodles. She would like to be a dancer when she grows up”

8. Is Dong poor? “Dong, nine, lives in Yunnan province in south-west China with his parents, sister and grandfather. He shares a room with his sister and parents. The family own just enough land to grow their own rice and sugarcane. Dong’s school is 20 minutes’ walk away. He enjoys writing and singing. Most evenings, he spends one hour doing his homework and one hour watching television. When he is older, Dong would like to be a policeman.”

9. Is Paballo poor?

10. Human rights “The notion of human right builds on our shared humanity. These rights are not derived from the citizenship of any country, or the membership of any nation, but are presumed to be claims or entitlements of every human being. They differ, therefore, from constitutionally created rights guaranteed for specific people.” ― Amartya Sen, The Idea Of JusticeAmartya SenThe Idea Of Justice 10

11. Poverty What is poverty? “Poverty is the inability of an individual or a family to command sufficient resources to satisfy basic needs” (Fields Ch4) Money-metric or multi-dimensional framework? Income and expenditure justified as poverty measure partly because of presumed correlation with well-being and empowerment. Important to understand that money is not end in itself, but means to an end $ correlated with food, shelter, nutrition etc but not well correlated with access to public services, safety, human rights etc Amartya Sen = Godfather 11

12. What is poverty really? When the poor are asked to characterise what it means to be poor, they use phrases like: Isolation from the community A lack of security Low wages A lack of jobs Poor nutrition Little access to water Poor educational opportunities (May, 1998 in Finn et al 2013) 12

13. Multidimensional poverty 13 Figure 1: The composition of the Multidimensional Poverty Index (Finn et al 2013) Anyone who is deprived in more than 3 of the dimensions is classified as multidimensionally poor

14. MDP For example, a household is classified as deprived in terms of: Schooling if no household member has at least 5 years of education Enrolment if one child of school-going age does not go to school Water deprivation is defined as not having piped water on site Deprivation in child mortality is indicated by a child having died before age 15 Nutritional deprivation is indicated if one person in the household is seriously underweight See Arden 2013 for full definitions What are some of the problems with this method? 14

15. MDI 15 Comparing poverty measures for South Africa for 1993 and 2010 (Finn et al, 2013) “This means that the 8% who remained multidimensionally poor in 2010 were deprived in fewer dimensions of poverty than in 1993: roughly, in four areas instead of five (on average). When the changes in H and A are taken together, they indicate that in 2010 there were significantly fewer multidimensionally poor people; and that those who were still poor, were somewhat less poor than in 1993.” Severe poverty can be defined as being deprived in 50% or more of the indicators

16. Sources of deprivation? 16

17. Main areas of deprivation among the multidimensionally poor 17

18. Why do we care about poverty/inequality? Political  political stability & democracy Ethical  Human rights Justice  Inter-temporal justice Social justice  Religious motivations Societal  Innate preference for equality Survival  Wasted human capital Philosophical  Ubuntu, egalitarianism 18

19. Conclusion on MDP? “Between 1993 and 2010 the reduction in multidimensional poverty was significant and notably higher than the concomitant fall in money-metric poverty. Thus, significant increases in public expenditure to attain universal school enrolment, to reduce child mortality and expand access to services such as electricity and sanitation to poor communities have been very effective in reducing multidimensional poverty.” Finn et al 2013 19

20. Hans Rosling 2006 TED talk… 20

21. Poverty Focus axiom: The only thing we need to know about the non- poor are how many there are (poverty not inequality!). Tony Blair was “intensely relaxed” about the millions earned by David Beckham (a footballer) provided that child poverty fell. Absolute vs Relative measure of poverty? $1/day or 30% mean income? 21

22. Money-metric poverty How do we go about calculating the number of people that are poor in a country? 22

23. Poverty Coudouel, Hentschel & Wodon 23

24. Poverty - SA (Leibbrandt et al, 2010) 24

25. Poverty-SA 25 (Leibbrandt et al, 2010)

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27. Poverty - SA 27 Impact of social grants on poverty? Labour market – focus for solving inequality? (SVDB).brief explanation of Human Capital Model

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29. Poverty - SA 29 Impact of social grants on poverty? Labour market – focus for solving inequality? (SVDB) “Wage inequality, deeply rooted in South Africa’s history, plays a central role in overall income distribution, and patterns of human capital development are fundamental to the future growth path and therefore to poverty and income distribution. The paper therefore concludes that reducing inequality substantially is currently unlikely without a massive increase in the human capital of those presently poor, but that prospects in this regard are inauspicious” (Van der Berg, 2010)

30. Poverty SA Has poverty in SA declined? It depends who you ask Survey method vs National accounts Which poverty line? Which distribution? 30

31. Poverty measurement - sidebar 31

32. Poverty - SA 32

33. Money-metric poverty – SA, the gist Poverty has not gone up since the transition Differing views on when and how much it came down Depends which surveys you use, also which method (Survey-method or national accounts anchoring) Common-sense methods are helpful Hunger decreased 33 Back to Beckham…

34. Inequality 34

35. Inequality Calculating the Gini coeficient Gini = (Blue) / (Red) Total equality? Total inequality? 35

36. Inequality 36 (Leibbrandt et al, 2010)

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38. Poverty and Inequality 38 (Coudouel, Hentschel & Wodon)

39. Inequality - SA 39

40. Inequality at a glance… 40 Ch4 Transformation Audit 2013

41. Inequality - SA < 41 Within-race inequality has grown (especially amongst Africans) Between-race inequality has declined African population important!!

42. Poverty & Inequality - questions Poverty Measurement issues – how to move forward? How to reduce poverty? Economic growth? / Trade? Social transfers? Education? Why hasn’t a reduction in MDP lead to an increase in employment? Inequality Is inequality a ‘national’ poverty? Implications for social/economic/political stability? 42