On why basic income has not yet been deployed

Informal settlement in Soweto. Credit to: The Conversation

The hypothesis: basic income has not been deployed in South Africa in part because the powers that be do not let go of their interest and ability to explore people.

The following article attempts to demonstrate the validity of this hypothesis.

Let’s begin with some background. Basic Income (BI) is not a new idea in South Africa. In fact a thorough economic analysis for BI implementation has existed since 2004. The analysis was  drawn from the work of recognized economists, specialists in the field, and the findings were summarized in what became known as the Taylor Committee. The Basic Income Coalition (composed of Black Sash, COSATU and SAAC), used these results to prove that BI is feasible, or at least should be tested, in South Africa.

More than 10 years have passed, and yet nothing resembling BI has been implemented or even tested in South Africa. Why not?

It is not due to lack of need: 54%¹ of South Africans – over 29 million people – live under the country’s poverty line, and over 40% of the labor force is unemployed². Moreover, according to the  BIG Financing Reference Group report, it is also not due to a lack of funds:

“The Basic Income Grant is an affordable option for South Africa. Although the four economists [Economic Policy Research Institute (EPRI), Prof. Pieter le Roux, Prof. Charles Meth and Dr. Ingrid Woolard] posit slightly different net costs for the BIG, representing transfers to the poor of different amounts, there was consensus that the grant is affordable without necessitating increased deficit spending be government.”

In spite of this, the same report also states that government officials believe that BI cannot combat poverty. They have refused to consider a BI, despite knowing that current social assistance plans fail to reach over 50% of those living under the poverty line, or nearly 15 million people. These officials have continued to say that BI would not be effective despite demonstration by the Taylor Committee that basic income is the best way to diminish or even eradicate poverty in the shortest amount of time. They also ignore fiscal collection and social security savings when speaking of BI, which more than doubles its actual net cost of about 24 million ZAR/year (1.35 billion €/year), according to the calculations of the Taylor Committee. In short, most government officials completely ignore these very consistent and thought-out analyses from the Taylor Committee. Why is that?

Well, the answer may lie in the kind of structure of South African economy. The private sector accounts for around 80% of the country’s economy³.  The median income is 3036 ZAR/month (171 €/month)⁴, which is low compared to European standards. Taking the United Kingdom as reference, the following table can be set up (Table 1).

Table 1 – Income relationships, South Africa / UK

The relationship between the median income and the average living income is considerably higher in the UK than it is in South Africa. Moreover, the ratio of median income to statutory minimum income is also much higher in the UK. Indeed, while the median income in the UK is above the minimum income (as it should be), this is not the case in South Africa: more than half of South Africans have wages below the statutory minimum income. Finally, as we can see on the graph below, the spread of incomes in South Africa is clearly skewed to the lower end on the income axis, while incomes in the UK are much more evenly distributed around the center (Figure 1 and Figure 2).

Figure 1 – Income spread in South Africa⁴

Figure 2 – Income spread in the UK⁵

These data show that the South African economy is impoverished compared to a country like the UK, and that most economic activity depends on a low-wage, low-skilled work force⁶. This situation is best maintained when a large number of poor, dependent people are craving for jobs in the economy. Given their subservient position, these millions of people will naturally accept low wages and substandard working conditions that they might not otherwise accept. They are also kept away from most schooling and higher education, which could provide them with extra skills and allow them to apply to other jobs or start their own businesses. This is convenient for large corporations, and these corporations lobby and finance politicians and governments to protect their interests by providing them with access to cheap labor and lax environmental laws. The Transatlantic Trade and Investment Partnership (TTIP) deals, for example, are just a formally imposed recognition of the attitudes of domination that large corporations foist upon governments and the people at large.

There is a link between corporate interests and government policy. Furthermore, the implementation of a basic income would basically be contrary to corporate interests: BI would lift millions of people out of poverty, empower them to refuse conditions of exploitation and start their own business, invest in education and bettering their lives – depriving the corporations of their pool of cheap labor. Government policymakers may also respond out of ideology or prejudice, but corporate political sponsoring response must not be ruled out, given the entrenchment and longevity of their denial (relative to progressive policies like basic income).

More information at:

A. BIG Financing Reference Group, 2004. ““Breaking the poverty trap”: Financing a basic income grant in South Africa.” Basic Income Grant (BIG) Financing Reference Group conference, Johannesburg, 24 November 2003. March, 2004.

Notes:

¹ – World Development Indicators – Poverty headcount ratio at national poverty lines (% of population), 2010

² – A more accurate, expanded definition of unemployment, including the so-called ‘discouraged jobseekers’, according to reference A.

³ – World Development Indicators – General government final consumption expenditure (% of GDP) = 20.3. Hence Non-government (private) final consumption expenditure (% of GDP) = 79.7

⁴ – From the spread of households within the income distribution in South Africa, 2008.

⁵ – From Measuring National Well-being – Personal Finance, 2012 (UK)

⁶ – Higher skilled professionals are usually paid on or above the median income, so a low income distribution as shown in Figure 1 must be related with a high proportion of low skilled workers.