How Income Inequality Hurts South Africa's Children

By Fazila Farouk · 24 May 2013

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Picture: Children from Lukhanyo Primary School, Zwelihle Township, Hermanus courtesy Godot13/Wikimedia Commons.
Picture: Children from Lukhanyo Primary School, Zwelihle Township, Hermanus courtesy Godot13/Wikimedia Commons.

There’s been a great deal of hand wringing in South Africa in the aftermath of the Marikana massacre. With the explosion of the underbelly of our society onto the international arena, South Africans have been left with little choice but to confront the demons of nearly 20 years of a failed democracy.

From the fact that no woman feels safe walking alone on South African streets, to the fact that millions of people continue to live without the most basic of dignities, ours is a democracy that has failed on so many levels.

What is to be done about the armies of poor black people in South Africa?

The problem is presented as extremely complex, yet the debates continue to be clichéd. The sad truth is that our ineffectiveness to resolve this issue is exposing the callous limitations of public debate in South Africa.

In 2011, South Africa topped the Gini Index, making our nation the most unequal country in the world. The Gini coefficient measures the distribution of income in a country. And again, reminding us that economic apartheid remains firmly entrenched in South Africa, in April this year, research findings from the South African Institute of Race Relations revealed that white men still earn the highest salaries in South Africa while black women earn the least.

At the same time, 77% of black women with children under the age of two are bringing up those children as single parents. This statistic was gleaned from the following fact released by market research company Eighty20: “89% of white women with children under the age of two are married or living together, while 23% of black women with children under the age of two are married or living together”. Eighty20 disseminated this information in January 2013 when it released data from its research on “maids and madams”.

Place this remarkable fact side by side with another “maids and madams” statistic - “20% of employed black women are domestic workers” - and an amazingly clear picture of the deep racial and economic inequality in this country emerges.

This inequality is having a profoundly negative effect on South Africa’s children.

We see stunted growth and poor performance at schools leading to poor employability. From chronic hunger to child-headed households to dropping out of school to teenage pregnancies, the list of social pathologies affecting poor children is extensive.

International NGO, Save the Children, has looked at the effects of inequality on children in a global study of 122 countries. Their report, “Born Equal”, published in October 2012, makes rather a strong statement about being born unequal.

Co-author of the report, Alex Cobham, participated in a debate on inequality in London early this year. Cobham argued that income per child in a given household is the "best single proxy” to measure the opportunity that children have -- for the type of education and healthcare they will have access to and the “cushion they will have if anything goes wrong”.

For each of the 122 countries that formed part of its study, Save the Children looked at the incomes of people in the top 10% of the population compared to people in the bottom 10%. What they found was that on average people in the top 10% earn 17 times more than people in the bottom 10%.

But looking closely at younger subjects, the study found that income inequality is twice as high for children.

"If you're a child in the top 10%, you have an income that is 35 times higher than a child in the bottom 10%," argued Cobham. Examining the “Born Equal” report, one finds that this is attributed to the prevalence of higher numbers of children in poorer households, in addition to the fact that children in richer homes simply have access to better assets and more resources.

This matters enormously for how children develop as people, Cobham said. The sharper the inequalities between different groups, the worse children at the bottom do and that carries on throughout their lives.

The key issue raised by Save the Children is that there isn’t a linear relationship between “equality of opportunity” and “equality of outcome”. The circumstances of poor children in extremely unequal societies often result in an inability to take advantage of opportunities, such as, access to education.

South Africa wasn’t part of the Save the Children study, but one imagines that we would perform far worse than the global average on inequality. Even the World Bank (in mid-2012) cautioned against our extreme inequality for the obstacles it places in our children’s pathways out of poverty. At the time that the Bank made these remarks, it had newly developed a “Human Opportunity Index”, which examines “equality of opportunity” against outcomes later in an individual’s life.

The results they found for South Africa are similar to the results that Save the Children found in other parts of the world.

The World Bank went beyond its conventional analysis when it argued that children’s circumstances at birth are important drivers of inequality in South Africa. “Race, gender, location and family background” are all factors that are beyond an individual’s control, the Bank finally acknowledged with respect to South Africa.

The World Bank has suggested that South Africa look to Latin America for inspiration on “targeted social policies”.

In this regard, one can argue that Brazil’s success has impressed and inspired many people around the world.

One can’t be sure that the World Bank with its singularly focused “economic growth” mantra would enthusiastically endorse all of the policies of Luiz Inacio Lula da Silva (Brazil’s famous President more commonly known as “Lula”), but SACSIS did have the good fortune of hosting Brazilian economist, Prof. Georgio Romano Schutte, at a panel discussion in February this year. He told us about how President Lula put inequality at the centre of Brazil’s growth strategy, which lifted more than 20 million people out of poverty in less than 10 years.

According to Schutte, when Lula won the election in 2002, he became the only president in the world to go to the World Economic Forum and the World Social Forum and deliver the same speech to both audiences. That speech was about the reduction of inequality as the starting point of any growth strategy.

Consequently dealing with inequality became the starting point of Brazil’s economic growth strategy. No doubt Lula would have poked huge holes in South Africa’s GEAR strategy, which was the starting point of entrenching the apartheid status quo through poor economic policy choices in post-apartheid South Africa.

In Brazil, as in many parts of the world, there is acknowledgement that the best way to reduce poverty and inequality is to create jobs. The focus is on creating jobs with upward mobility. However, as Schutte pointed out, while these jobs were being created, Lula also insisted that nobody live in extreme poverty.

Hence the birth of the widely acclaimed Bolsa Familia programme, which directly transferred cash to the poor and kept their children in school.

Lula came under severe attack from the Brazilian media for this programme. The media argued that it wasn’t good policy - it was "charity".

Schutte recalled a meeting where Lula met with the ministry of social development responsible for implementing the Bolsa Familia programme. Lula said to officials from the ministry, "Stop defending yourself in the press. Just say yes this is charity. Yes, this is solidarity.”

At the same time, “There was a huge outflow of capital when Lula announced his policies because the middle class became extremely suspicious,” Schutte reported.

Regardless, the Bolsa Familia programme was an enormous success. And it succeeded because it didn’t work in isolation. Lula also ensured that the minimum wage was increased enormously, with links to pension funds. Credit lines were also opened to Brazil’s poor.

According to Schutte, there was suddenly an enormous increase of money in the hands of poor people. “What do poor people do when they have money? They don’t send it to Switzerland. They don’t put it in derivatives. They spend it. They spend it on food and clothes - immediately creating many opportunities for small businesses,” Schutte argued.

From the Brazilian experience, to fight poverty, you need “consensus, policies and money”.

So the Lula government also set about building consensus around the idea that it is unacceptable to have extreme poverty in a middle-income country. Fifteen years ago that would not have been possible, says Schutte. The middle class would have asked, "What does that have to do with us?" But today there is widespread consensus in Brazil that extreme poverty is unacceptable.

South Africa is far from reaching such consensus. As a society, we have yet to even reach consensus on what constitutes a decent or minimum standard of living for all South Africans.

Does racial prejudice play a role in this?

In this regard, South Africa’s middle and elite classes would not be unlike Brazil’s, who, according to Schutte, are uncomfortable about being in the same room as poor people. For example, people don't feel comfortable suddenly seeing black people in their universities. They don’t like Lula’s social policies because it diminishes social apartheid, he said.

Building consensus around what constitutes a fair and just society requires dealing with many economic and cultural obstacles, as the Brazilian case shows, but the one thing they did get right, which flies in the face of the labour debates we are having here in South Africa, is to increase the minimum wage substantially and demand stronger protection for workers, including Brazil’s 7.2 million mostly black domestic workers -- many of whom refuse to work today without a proper contract, which includes social security protection.

In ten years under Brazil’s Workers’ Party, the bottom 20% of Brazilians had an increase in their incomes of up to 70%. The top 10% of the population also had an increase, but it was small in comparison. Nothing has been taken away from Brazil’s elites, but the gap between rich and poor has started to close.

This is how you reduce inequality. This is how you put money into poor homes. This is how you show poor people that you value their contribution to the economy. This is how you help them to live with dignity and truly offer their children the promise of a brighter future.

The evidence against inequality is overwhelming. For the sake of our children, why are South Africans not demanding policies that reduce it?

Farouk is founder and executive director of The South African Civil Society Information Service.

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