picture by johnny miller
South Africa is known as one of the most unequal countries in the world, reporting a per-capita expenditure Gini coefficient of 0,67 in 2006, dropping to 0,65 in 2015. This is according to the Inequality Trends in South Africa report released by Stats SA. According to the Palma ratio, the top 10% of the population spent 8,6 times more than the bottom 40% in 2006; this ratio reduced to 7,9 in 2015. These figures indicate that overall inequality, measured at a national level, has declined between 2006 and 2015
The Eastern Cape reported the highest levels of inequality in 2015, with the Western Cape and Mpumalanga coming in second. All provinces, except Limpopo and Eastern Cape, experienced a decline in inequality from 2006 to 2015.
The differences in annual mean and median expenditures by province show the reality of interprovincial inequality. Gauteng and Western Cape were better off when compared to other provinces, as illustrated by their higher annual mean and median expenditures. Individuals living in Limpopo and Eastern Cape had the lowest annual mean and median expenditures for all four data points.
Since 2006, there has been a greater dependence on social grants and less reliance on income from the labour market in the bottom deciles. In contrast, there was greater reliance on income from the labour market in the top deciles.
While labour market income is overwhelmingly the largest contributor to income inequality when compared to other income sources, social grants and remittances have played a crucial role in reducing the income inequality gap between the bottom and top deciles over the years in South Africa.
White people are more likely to find work. And once they do, they also earn better. Between 2011 and 2015, a white person earned R24 646 per month on average, more than three times the R6 899 of their black counterparts. Female workers earned around 30% less than male workers during the same period, and workers in the countryside earned less than half of what urban workers did.
But why does the gap in South Africa’s earnings continue to widen? Here, the report delivers devastating evidence regarding the performance of incomes at the top and the bottom.
The real wages of the bottom 10% of earners have plummeted, shrinking by a quarter between 2011 and 2015. The country’s median incomes also shrank by 15%. By contrast, the earnings of the top 2% grew by 15% over that period, while those in the top 1% saw their earnings balloon by 48%.
Shrinking incomes for the majority in the face of huge growth in those of a handful at the top is not the only thing driving income inequality in South Africa. Economists Ihsaan Bassier and Ingrid Woolard have shown recently that financial capital is also a key contributor.
While the economy grew by only 4% between 2003 and 2016, the income received by the top 5% of the population from things like shares and capital gains grew by up to 20%. This kind of capital income represents nearly half of the income of the country’s richest 1%.