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Social inequality, like investment, must be addressed


Andrew Jackson, seventh president of the US, once said: “We should measure the health of our society not at its apex, but at its base”. 

I looked out for comments on the labour market in President Cyril Ramaphosa’s second state of the nation address (Sona), and what I found most interesting is that the relationship between the labour market, inequality and poverty was not emphasised. Instead, the three were mentioned separately and in passing towards ‘bigger’ issues. That said, these issues – mostly investment-dominated – were positive.

This makes me wonder whether the theme of the ANC’s Thuma Mina ‘reconnecting with the people’ campaign is to position investment over social challenges. I hope we’ve learnt that success in the former does not miraculously translate into resolving the latter.

I often think about the various social problems that exist in SA. In the long term, it usually comes down to the intertwined nature of education and income inequality. Until any significant progress is made there, our society is only going to continue on a slow, downward slide.

South Africa’s inequality is an anomaly when compared to countries of similar GDP and development progression. Yet the dynamics of inequality are such that they are interwoven with old longstanding and new emerging challenges. How is that manifestation of inequality affected by the past and present? I’ll use education to develop this thought further.

The education-earnings paradox

On the old and longstanding challenge, consider how the present education policies are failing to undo the deep-rooted legacy of a discriminating and inferior education system the apartheid government conferred upon black people. The South African proletarian working class is not only an inheritor of the present-day failing education; income levels restrict their ability to access better education.

Now consider the new and emerging challenge of (i) skills mismatch and shortage and (ii) the unemployment crisis faced by many graduates. Assume that one way to solve inequality is through education but its policies are characterised by flaws such as producing individuals with high skills and those with low/no skills. The effect thereof is the widening gap between the incomes of individuals. 

Perhaps one of the most uncomfortable features of inequality in South Africa is how it can be linked historically. The dispossession of land and the ensuing creation of migrant labour decided the income and wealth distribution of the country. In many ways, this set the trend for wage determination with those in the rural areas working mostly in the low paying agricultural sector. For those in urban areas, the better part of their income went on transport due to historic spatial planning that ensured they lived far from work.

Migrating from rural poverty to urban poverty

This still endures; rural depopulation is increasing in South Africa, with most working-age people migrating to urban areas in search of employment, higher incomes and better education. In truth, rural-urban migration rarely results in jobs or high income. While their lives may be better due to access to healthcare and basic services, many of them still live in poverty with little to no income.

Whether one sees the effects of spatial planning as a past or continuing factor is not the point, what remains is how access to services determines the employment rate and thus income inequality. We know from Stats SA that income in urban areas is far higher than in rural areas.

It is theoretically possible to overhaul this repeatedly overlooked link between inequality and the labour market in South Africa.

First, government’s policy interventions must go beyond social grant distribution. It needs to lower the skills discrepancy while simultaneously fixing education and not just tinkering with its outcomes.

Second, unless there are social policies that can mitigate poverty, youth unemployment and the heavily indebted middle class, the labour market will continue to punish the poor and the youth with ever-widening income disparities while demanding years of experience from the job market entrant – forever trapping them on the treadmill of hardship.

Inertia

The third should be common sense understanding. However, I’ll spell it out for those who think it is a non-factor in an ongoing inequality crisis. The inefficiencies in government (especially within state-owned enterprises) affect and lessen South Africa’s economic competitiveness. Combined with corruption, cronyism and poor policies, these inefficiencies drag the economy down and dim our opportunities in the global value chain. 

The economic and social fallout of ongoing inequality makes it a triple-threat challenge because, aside from the injustice of inequality itself, (i) its widening has significant consequences for political and economic stability and (ii) it lowers potential growth, further dooming low-income households and the poor to worsening wages and few jobs. A failing economy cannot reduce poverty for its low-income earners let alone those who are dependant on social welfare since the labour market distribution pattern is already tilted in favour of those who are highly skilled and high earners.

The worries about lack of investment are justified, but so too are the ones about the labour market. May we not prioritise one over the other. Resolving the interlocked problem of education and income inequality is requisite for investment. 



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