Trends in the working poverty rate (WPR) in post-apartheid South Africa, 1997–2012

ABSTRACT

As South Africa prepares to implement a national minimum wage for the first time, a number of questions about the potential benefits of a minimum wage have emerged. However, most of the South African literature, to date, has been concerned with the country's high unemployment rate and not on the quality of employment. In particular, there has been very little attention given to one widely used indicator of decent work, the working poverty rate (WPR). Using the October and General Household Surveys, we present an analysis of trends in working poverty over most of the post-apartheid period (from 1997 to 2012). The findings reveal that, while income poverty has decreased, poverty among the employed is a persistent feature of the post-apartheid period and that the contributions of earnings from employment to overall poverty reduction have been disappointing.

KEYWORDS:

• Employment
• poverty
• earnings

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Michael Rogan http://orcid.org/0000-0003-1695-8179

Notes

1 Some of the reasons offered in the literature for the high and growing working poverty rates (particularly in the US) include: deindustrialisation, the rise of the service industry, the emergence of ‘low-wage traps’, declining labour standards, and low (and declining) union density.

2 For a comprehensive discussion of measurement issues in the working poverty literature, see Thiede et al (2015).

3 Ideally, we would have tracked working poverty trends up until 2016 but the national master sample used by Statistics South Africa was refreshed in 2013 in order to update population estimates from the 2011 Census. As a result, there is a clear break in the series after 2012 where poverty rates (and the WPR) increase dramatically over a short two year period. The datasets used in the analysis therefore include the 1997 and 1999 OHSs and the 2004, 2006, 2008, 2010 and 2012 GHSs.

4 An analysis (see Posel and Casale 2006) of earnings responses has suggested that assigning the mid-point is not necessarily any more biased than other methods of imputing income for those who respond in brackets (see also Vermaak 2010). Other work has also suggested that (von Fintel 2007: 310), ‘“Rudimentary” methods such as midpoint imputation should not be dismissed’ and that bracket responses in South African household surveys are reasonably stable.

5 These per capita monthly poverty lines include (in 2000 prices): the lower-bound poverty line (R219), Hoogeveen & Özler's R323 poverty threshold, and an upper-bound poverty line (R593).

6 See Statistics South Africa (2008) for details about how the official poverty lines were calculated.

7 Not surprisingly, the WPR is far higher among workers in the informal sector (46% in 2010) than for those in the formal sector (17% in 2010). The interesting finding, however, is that the risk of poverty decreased significantly between 2010 and 2012 in the informal sector (i.e. from 46% to 41%) but there was no change for formal sector workers.

8 The full results of the sensitivity tests are available from the authors upon request.

9 As identified earlier, the OHSs and the GHSs do not regularly capture information on the occupations and industries of workers. Where they do, caution should be exercised in making comparisons across time since the occupation and industry categories are not consistent and are, therefore, not directly comparable. However, as context, we provide descriptive analyses of the employment characteristics of the working poor based on the 1997 OHS and the 2006 GHS (both surveys in which at least some information on employment activities was provided). In 1997, about 20% of the working poor (at the R323 poverty line) worked in private households, 17% worked in agriculture, and 11% worked in worked in both manufacturing and trade. In terms of broad occupation groups, the working poor were concentrated largely in elementary occupations (25%), domestic work (20%) and artisanal occupations (14%). In 2006, 27% worked in wholesale and retail trade, 20% in private households, 13% in agriculture, 11% in community and personal services, and 10% in both manufacturing and construction. In terms of occupational groups, 36% worked in elementary occupations and 16% in domestic work. About 13% of the working poor in 2006 were service workers.

10 In line with other conventional poverty analyses, the (working) poverty gap is the average distance from the poverty line among the (working) poor, expressed as a proportion of the poverty line (Foster et al. 1984).

11 Comparisons with the GHSs after 2008 should be made with caution since the response categories for the self-reported question on household income sources changed slightly after 2008.