Presentation to:the Joint Budget

Committeeon the Medium Term

Budget Policy StatementEmployment & Social

SecurityNovember 19, 2003Dr. Miriam AltmanDr. Ingrid Woolard

Employment & Economic Policy Research ProgrammeHuman Sciences Research Council

Maltman@hsrc.ac.zaiwoolard@ hsrc.ac.za

Critical dilemma Finding balance, in context of

massive social imperatives Balance between

Social security to ensure basic standard of living

Employment & investment policy to ensure longer term labour absorbing growth path

Trade off does exist

Employment

Unemployment rising across race groups

Implications for most categories of workers & graduates to find workEspecially problem for black workers & graduatesContrary to perception, still easier for white graduates in private sector

Unemployment by race (strict def'n)

05

1015

2025

3035

40

94 95 96 97 98 99 00 01Year

% u

nem

ploy

ed

Total

African

Coloured

Asian

White

Source: OHS, LFS

-15

-10

-5

0

5

Sector

% c

hang

e

% change 1991-1995

% change 1996-2000Source: TIPS, Standardised Industry Database

Employment by sector

0

2 000

4 000

6 000

8 000

10 000

12 000

94 95 96 97 98 99 00 01 02

Empl

oym

ent (

'000

s)

Commercialagriculture

Formal sector(excl. agriculture)

Informal sector

Subsistenceagriculture

Domestic service

Total (exclsubs.agric.)

GDP & Formal Employment

If taken from 1998, formal private sector employment growing with GDPNote context:

Falling real average incomes of low to medium skill formal sector workersAbout 500,000 people called ‘employed’ earn ‘in-kind’ and do not earn moneyPublic sector employment seems to be weighing down on employment

707580859095

100105110115120

1994 1995 1996 1997 1998 1999 2000 2001 2002

Inde

x (1

999

= 10

0)

Public Private, non-agricTotal Formal Employment GDP Value (1995 prices)Mil

Employment Objectives

Gov’t and ANC have unemployment goal = ½ unemployment by 2014

This would mean unemployment at about 15.3% Would require generation of R 4.1 mn net new

jobs or avg of 372,000 jobs created annually. Estimate that economic growth & existing interventions

could result in 1.8 mn jobs Some interventions required to address creation of

remaining 2.3 mn jobs or 209,000 per year. If created by public procurement – very serious financial

implications (eg. @ R50,000 per job, would cost R 10bn per year, on additive basis)

Some alternative sources being debated = ?

Infrastructure Expanded Public Works Programmes Expanding social services Social security – esp for shortfall

Recognise complementarity in spending to meeting basic needs & creating employment

Construction expenditure – projections (deflated)

0

10

20

30

40

50

60

70

80

00/01 01/02 02/03 03/04 04/05 05/06

R B

illio

n

National Provincial

Municipalities Public Enterprises

Extra-budgetary instutions Public-Private Partnerships

TOTAL

Ability to deliver???Actual and Planned Capital Expenditure of Local

Government 1996 – 2001

Source - Eskom

0

2

4

6

8

10

12

14

16

96/97 97/98 98/99 99/00 00/01

R B

illio

n

Capital Budget Capital Expenditure

0

2

4

6

8

10

12

14

16

96/97 97/98 98/99 99/00 00/01

R B

illio

n

Capital Budget Capital Expenditure

Expenditure on ECD & HIV Home Care

(deflated)

Huge need, room for expansion, massive employment creator Approx. 1.8 million people in formal community services (vs. approx 250,000 in construction)Complementarity – ARV roll-out, orphan care, home care, ECD, etc

2003/4 - 2005/6 estimates

0

100

200

300

400

500

600

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

Mill

ion

Rand

(d

efla

ted

- 200

3/4)

ECD HIV/AIDS

0

100

200

300

400

500

600

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

Mill

ion

Rand

(d

efla

ted

- 200

3/4)

ECD HIV/AIDS

Social Security

Household access to wage income

Year households with wage-earners (m)

% of households with wage-earners

1995 6.2 71.3%

1997 5.9 63.3%

1998 5.9 63.4%

1999 7.4 67.9%

2000 7.8 70.1%

2001 7.5 68.5%

2002 7.2 66.0%

Many poor households rely entirely on grants Poorest 20% of households:

19% have grants as main source of income

Next poorest 20% of households: 28% have grants as main source of

income

Social Security Spending

Grant Type Number of beneficiaries

Amount p.m.

Old Age Pension

2.0 mn 1.40 bn

Disability 1.1 mn 0.78 bnFoster Care 0.18 mn 0.09 bnCSG 3.8 mn 0.60 bn

Source: SOCPEN October 2003

Old Age Pension• Level of grant is more than twice

average per capita income for Africans

• Generous by international comparisons (1.2% of GDP)

• Take-up is very high (close to 100%?)• Gender sensitive – more than twice as

many women as men get the grant• Reaches many households with

children

Old Age Pension

Wes

tern

Cap

e

Eas

tern

Cap

e

Nor

ther

n C

ape

Fre

e S

tate

KwaZ

ulu

Nat

al

Nor

th-W

est

Gau

teng

Mpu

mal

anga

Lim

popo

ALL

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%% of elderly in poverty after SOAP% of elderly in poverty before grants

Child Support Grant• HSRC estimates that there are 6 million

potential CSG beneficiaries under the age of 9

• Only 3.8 million have registered to date, but

• Registrations have been increasing dramatically – • more than 1 million children added since March

2003 alone

Disability Number of beneficiaries grew by

36% between February & October 2003

Regional variation suggests that take-up may continue to grow:-

e.g. in Limpopo 3% of adults receive disability grant

vs 7% of adults in Eastern Cape

Foster Care 180 000 children currently

Growing slowly:AIDS orphans may pressure Roll out of ARV should slow growth

Concluding remarks Balance between social security &

employment imperatives could have serious budgetary implications in future

Required job creation to meet employment targets could cost R 10bn on additive basis. Potential for policy complementarity Fiscally sustainable?

Social security ---o Extended Child Support Grant.o The aging of the populationo The impact of AIDS illnesso Are we effectively counting potential beneficiaries? What

are the possible cost implications?