{"id":100150,"date":"2015-10-03T15:00:45","date_gmt":"2015-10-03T13:00:45","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=100150"},"modified":"2015-10-04T09:01:53","modified_gmt":"2015-10-04T07:01:53","slug":"is-south-africa-the-most-unequal-country-in-the-world","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/100150\/is-south-africa-the-most-unequal-country-in-the-world\/","title":{"rendered":"Is South Africa the most unequal country in the world?"},"content":{"rendered":"

It is often said that South Africa is the most unequal society in the world. Business and Economy Editor Andile Makholwa put a few questions to Haroon Bhorat<\/a>, Professor of Economics and Director of the Development Policy Research Unit at the University of Cape Town.<\/em><\/p>\n

Is it true that South Africa is the most unequal society in the world? How unequal is it?<\/strong><\/p>\n

Depending on the variable used to measure inequality, the time period, and the dataset, South Africa\u2019s Gini coefficient ranges from about 0.660 to 0.696<\/a>. The Gini coefficient is the measure of income inequality, ranging from 0 to 1. 0 is a perfectly equal society and a value of 1 represents a perfectly unequal society.<\/p>\n

This would make South Africa one of the most consistently unequal countries in the world.<\/p>\n

I say \u201cconsistently\u201d because you may find a Gini of say 0.7 for a country that has had only one survey in the last 20 years. This is not a consistent measure. Or you may find a society that has undergone civil war.<\/p>\n

How do we compare with other developing countries? What\u2019s better or worse about South Africa than say India or Brazil?<\/strong><\/p>\n

Brazil\u2019s Gini<\/a> was very similar to South Africa\u2019s in 1994. Since then, inequality in Brazil has fallen<\/a> given the rapid rise in secondary school enrolment and graduation rates (without sacrificing quality), the introduction of conditional cash transfers and strong economic growth.<\/p>\n

India\u2019s poverty levels remain higher than South Africa, but its inequality levels are much lower<\/a> than that of Brazil and South Africa. In contrast to both economies, South Africa since democracy has seen a moderate reduction in poverty levels, combined with a sharp rise in income inequality<\/a> since 1994. This has all been amid single-digit economic growth.<\/p>\n

How do we know how unequal South Africa is compared with other countries. What measures are used and what matters when measuring inequality? What\u2019s missing in the measurements?<\/strong><\/p>\n

Global datasets on measuring inequality, such as those produced by UNU-WIDER<\/a> and the World Bank<\/a>, allow us to make these cross-country comparison. Other measures of inequality include the Theil Index<\/a> (to measure the contribution of between and within-group inequality to overall inequality) and the Atkinson Index<\/a>.<\/p>\n

One key omission in the measurement of inequality (and poverty) is that they are income-based. Hence, we do not account for non-income welfare among individuals and households. Access to public services such as energy and water together with a specific measurement of the accumulation of private assets are excluded from our standard measures of inequality and poverty.<\/p>\n

The United Nations’ Human Development Index<\/a> is one attempt at trying to incorporate some of these non-income dimensions into our measurement of welfare.<\/p>\n

Why is inequality so pronounced in South Africa?<\/strong><\/p>\n

There are myriad reasons, but some of the key factors include skewed initial endowments (or assets that people and households have) post-1994 in the form of, for example, human capital, access to financial capital, and ownership patterns.<\/p>\n

All of these, and other endowments, served to generate a highly unequal growth trajectory, ensuring that those households with these higher levels of endowments gained from the little economic growth there was.<\/p>\n

In addition, we are an economy characterised by a growth path which is both skills-intensive and capital-intensive, thus not generating a sufficient quantum of low-wage jobs \u2013 which is key to both reducing unemployment and inequality.<\/p>\n

What can be done about it? Is there anything the political economist Thomas Piketty can teach us?<\/strong><\/p>\n

Piketty\u2019s thesis in part argues that schooling is critical for reducing inequality in the long-run. Human capital accumulation is one possible mechanism through which to overcome a growth path where the rate of return on capital ( r ) exceeds the rate of economic growth (g) \u2013 r>g.<\/p>\n

To generate a more equal growth path, thus equalising r and g, it is argued that the schooling and educational pipeline plays a potentially crucial role in an economy\u2019s long-run growth trajectory.<\/p>\n

By Haroon Bhorat,\u00a0Professor of Economics and Director of the Development Policy Research Unit, University of Cape Town<\/em><\/p>\n