Describing and decomposing post-apartheid income inequality in South Africa

Abstract

This paper describes the changes in inequality in South Africa over the post-apartheid period, using income data from 1993 and 2008. Having shown that the data are comparable over time, it then profiles aggregate changes in income inequality, showing that inequality has increased over the post-apartheid period because an increased share of income has gone to the top decile. Social grants have become much more important as sources of income in the lower deciles. However, income source decomposition shows that the labour market has been and remains the main driver of aggregate inequality. Inequality within each racial group has increased and both standard and new methodologies show that the contribution of between-race inequality has decreased. Both aggregate and within-group inequality are responding to rising unemployment and rising earnings inequality. Those who have neither access to social grants nor the education levels necessary to integrate successfully into a harsh labour market are especially vulnerable.

Keywords:

• post-apartheid income inequality
• racial inequality
• labour markets
• social grants
• inequality drivers

Acknowledgements

The authors acknowledge financial support for this paper from the National Income Dynamics Study in the South African Presidency and from the Social Policy Division of the Organization for Economic Cooperation and Development. Murray Leibbrandt acknowledges the Research Chairs Initiative of the Department of Science and Technology and National Research Foundation for funding his work as the Research Chair in Poverty and Inequality. The authors are particularly grateful to Michael Förster of the OECD Social Policy Division, to Charles Meth of SALDRU for detailed written comments, and to participants at the conference on ‘Overcoming structural poverty and inequality in South Africa: Towards inclusive growth and development’, Boksburg, Johannesburg, 20–22 September 2010, and to seminar participants at the OECD Expert Seminar and at SALDRU for their comments.

Notes

¹The paper draws heavily on the working paper by Leibbrandt et al. (2010).

²For a more comprehensive overview of the comparison of the 1993 and 2008 agricultural income variables see Leibbrandt et al. (2010).

³Details of the weighting procedures can be found in SALDRU (1994a) and Wittenberg (2009).

⁴See Duclos & Araar (2006) for a description of the derivation and use of these standard errors.

Source: SALDRU (1994b, 2008). Own calculations.

Source: SALDRU (1994b). Own calculations.

Source: SALDRU (2008). Own calculations.

Source: SALDRU (1994b, 2008). Own calculations.

Source: SALDRU (1994b, 2008). Own calculations.

Source: SALDRU (2008). Own calculations.

⁵We thank an anonymous referee for this interesting point.

⁶See Cowell (2011:155) for the relevant formulas.

⁷Surprisingly, given the general consistency between our findings, Bhorat and Van der Westhuizen's formal decomposition analysis suggests that the declining between-race component may actually have stalled.