Effectiveness of SP in Fighting Poverty and Inequality

Prof Alex van den HeeverChair in the Field of Social Security

Alex.vandenheever@wits.ac.za

SOCIAL SECURITY IS THE ROUTE TO A HEALTHY SOCIETY

Market-related work/employm

ent

Subsistence work

Unremunerated work

Leisure

Observed GDP

Unobserved GDP

Total Welfare

Market-related work/employm

ent

Subsistence work

Unremunerated work

Leisure

Observed GDP

Unobserved GDP

Total Welfare

Market-related work/employm

ent

Subsistence work

Unremunerated work

Leisure

Observed GDP

Unobserved GDP

Total Welfare

Market-related work/employm

ent

Unremunerated work

Leisure

Observed GDP

Unobserved GDP

Total Welfare

Cumulative share of population

Cum

ulati

ve sh

are

of in

com

eLorenz curve

Structural increase in social risks

Structural decrease in social risks

Impacts on

• Structure of consumption• Industrial development• Distribution of human capabilities• Distribution of welfare/wellbeing• Political stability

Under normal circumstances the quality of overall social wellbeing is a policy choice and not a function of factors outside the control of governments

Social protection seeks to maximise welfare…

• No trade-off between well-designed social protection and employment/GDP growth– SP protects the distribution of income– SP protect the distribution of capabilities

• Inequality will increase structurally in the absence of social protection

• Economic development will proceed more normally if overall welfare is seen as integral to the growth process

The distribution of income does not reflect the distribution of capabilities/contribution to output

Social Protection Floor

• Universal system– Non-contributory (transfers and in-kind services)

• Requires income transfers• Subject to progressive realisation

– Contributory (social insurance)• Requires well governed mechanisms • Focus on risk pooling• Limited income transfer required

• Protection applies to families with and without adequate incomes

South Africa comparison: percentage of total income earned by the top 10% of income earners

19131916

19191922

19251928

19311934

19371940

19431946

19491952

19551958

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

20092012

0

10

20

30

40

50

60

SA Malaysia Korea US Sweden Germany UK AustraliaYear

Perc

enta

ge

Source: World top incomes database: http://topincomes.g-mond.parisschoolofeconomics.eu/ (adjusted)

South Africa comparison: percentage of total income earned by the top 5% of income earners

19131916

19191922

19251928

19311934

19371940

19431946

19491952

19551958

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

20092012

0

5

10

15

20

25

30

35

40

45

50

SA Malaysia Korea USSweden Germany UK Australia

Year

Perc

enta

ge

Source: World top incomes database: http://topincomes.g-mond.parisschoolofeconomics.eu/ (adjusted)

South Africa comparison: percentage of total income earned by the top 1% of income earners

19131916

19191922

19251928

19311934

19371940

19431946

19491952

19551958

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

20092012

0.0

5.0

10.0

15.0

20.0

25.0

30.0

SA Malaysia Korea USSweden Germany UK Australia

Year

Perc

enta

ge

Source: World top incomes database: http://topincomes.g-mond.parisschoolofeconomics.eu/ (adjusted)

Policy framework

Social security

Labour market

Economy

CapabilitiesActive labour market policy

Conditions of service

determination policy

Industrial policy

Tax regimeRegulatory governance

Training and skills development

Education

Healthcare

Early childhood

development

Disability

Basic family incomes

Loss of employment

Healthcare

DisabilityPensions

Non-contributory Contributory

Pensions

Welfare services

Loss of employment

Economic growth

Special employment programmes

END