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Towards understanding the impact of the international financial crisis on child poverty in South Africa: The child poverty context Ramos Mabugu*, Debra.

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Presentation on theme: "Towards understanding the impact of the international financial crisis on child poverty in South Africa: The child poverty context Ramos Mabugu*, Debra."— Presentation transcript:

1 Towards understanding the impact of the international financial crisis on child poverty in South Africa: The child poverty context Ramos Mabugu*, Debra Shepherd** and Servaas van der Berg** with Margaret Chitiga°, Bernard Decaluwé°°, Hélène Maisonnave*, Véronique Robichaud°°, Judith Streak** and Dieter von Fintel** * Financial and Fiscal Commission, South Africa ** University of Stellenbosch ° University of Pretoria °° Laval University (Québec) and PEP network Draft paper to Unicef/ODI conference, London, November 2009

2 Introduction Macro-micro study: – CGE model uses micro-econometrically determined elasticities – Micro-simulations use CGE outputs Issues covered here: – Child poverty profile – Child Support Grant as major instrument to combat child poverty – CGE model and its results – Possible implications for poverty

3 Poverty profile Stochastic poverty dominance for most dimensions Adult equivalence scale does not much affect poverty profile Thus use per capita income at 40 th percentile as poverty line 52.9% of population poor: 65.5% of all children (11.8 million) Differentials larger for P 1 and P 2 – thus lower poverty line would increase child-adult poverty differential Poverty largest amongst youngest, blacks, rural areas, poorer provinces Reported hunger strongly declined – probably because of Child Support Grants (CSGs) and other grants (employment growth played only a small role)

4 Poverty profile for children and adults (poverty line at 40th percentile of household per capita income) Child poverty (0-17 years) P 0 Poverty headcount rateP 1 Poverty depth measure P 2 Poverty severity measure Rate (%)Number Age 0-4 66.1 3 066 5090.3360.213 5-14 65.7 6 681 5070.3430.202 15-17 63.8 2 067 6090.3320.203 0-17 (all children) 65.5 11 822 5440.3280.205 18+ (all adults) 45.2 0.213 0.126 Racial group Black 72.511 100 826 0.3750.232 Coloured41.3623 4120.1670.093 Asian24.276 1370.0930.052 White2.018 0810.0120.008 Urban/Rural location Rural82.87 376 4510.4460.28 Urban48.64 442 4910.2260.133

5 Households that reported that children went hungry in the past year

6 Child Support Grants Introduced 1998, expanded rapidly – Growing coverage within age-eligible groups – Age-eligibility increased from 7 to 15 years Quite good targeting – but puzzlingly large errors of exclusion Reduced poverty in period of good growth Hypothesis: CSF acts as a form of income diversification that mitigates impact of economic shocks on vulnerable children

7 Contribution of spending on each type of social grant to total social grant spending

8 CSG: Eligibility and coverage GHS Eligible age Recipients of CSG Pop. of eligible age [D] Coverage rate [A]/[D] Of eligible age [A] Not of eligible age [B] Total [C] 20030-8 years2 241 760321 5342 563 294 8 299 03927.0% 20040-10 years4 201 481175 5264 377 00711 100 24137.9% 20050-13 years5 702 793139 0435 841 83614 052 17040.6% 20060-13 years6 459 760265 5796 725 33914 152 50945.6%

9 CSG roll-out: Progression over time in CSG coverage rates in households by earnings decile of the employed

10 Economic crisis and modelling its impact SAs first recession in 17 years Cumulative job losses 1 million Two scenarios modelled in CGE model: – Moderate (growth picks up from end 2009) – Severe (protracted global slowdown)

11 IMF Growth Projections for South Africa (estimates after 2008)

12 Impact on unemployment (Note: in %, not percentage points) High SkilledSkilled and Semi- skilled Low skilled YEARSMODSEVMODSEVMODSEV 2005000000 2008 +4,26+6,84 +1,26+1,12+0,43 +3,16 2009+1,70 +6,97 +0,37+1,13+0,28 +4,51 2010+0,51+4,04+0,28+1,85+0,21+1,26

13 Potential effect of CSG and job losses on FGT poverty measures (2008 = base year) (provisional results) P 0 Headcount Poverty rate P 1 Poverty Gap ratio P 2 Squared Poverty Gap ratio Baseline 2008Child with CSG0.6860.4170.304 Child without CSG0.7210.5090.422 2009: 1.2 million job losses Child with CSG0.7060.4450.331 Child without CSG0.7360.5380.454 Note: CSG has larger effect than employment In economic boom, similar results held: employment contributed little to poverty decline

14 Static effect of CSG on child poverty headcount

15 Effect of 1.2 million job loss on child poverty headcount

16 Elasticities and effect of prices Prices derived in modelling NIDS data Urban-rural poverty differential narrows when using these prices Generally high price elasticities mean much substitution following price rises However, low price elasticity for staple (maize) impacts on consumption volumes

17 Poverty adjusted for price differentials: Early estimates Headcount poverty rateUrbanRuralTotal Households0.3950.4800.434 All individual level0.4630.5130.489 Children0.4950.5310.516 Adults0.4340.4980.465

18 Provisional conclusion Economic crisis may not have completely reversed progress in child poverty that resulted from expansion of CSG in recent growth period Yet the crisis ended the period of declining child poverty and hunger Non-money metric impact probably more limited, due to structure of SA service provision (e.g. education free for poor, public health largely free)


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