1. Presentation to: the Joint Budget Committee on the Medium Term Budget Policy Statement Employment & Social Security November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard Employment & Economic Policy Research Programme Human Sciences Research Council Maltman@hsrc.ac.za iwoolard@ hsrc.ac.za November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard Employment & Economic Policy Research Programme Human Sciences Research Council Maltman@hsrc.ac.za iwoolard@ hsrc.ac.za

2. Critical dilemma  Finding balance, in context of massive social imperatives  Balance between  Social security to ensure basic standard of living  Employment & investment policy to ensure longer term labour absorbing growth path  Trade off does exist  Finding balance, in context of massive social imperatives  Balance between  Social security to ensure basic standard of living  Employment & investment policy to ensure longer term labour absorbing growth path  Trade off does exist

3. Employment

4. Unemployment rising across race groups  Implications for most categories of workers & graduates to find work  Especially problem for black workers & graduates  Contrary to perception, still easier for white graduates in private sector

5. Employment by sector

6. GDP & Formal Employment If taken from 1998, formal private sector employment growing with GDP Note context: Falling real average incomes of low to medium skill formal sector workers About 500,000 people called ‘employed’ earn ‘in-kind’ and do not earn money Public sector employment seems to be weighing down on employment

7. Employment Objectives Gov’t and ANC have unemployment goal = ½ unemployment by 2014  This would mean unemployment at about 15.3%  Would require generation of R 4.1 mn net new jobs or avg of 372,000 jobs created annually.  Estimate that economic growth & existing interventions could result in 1.8 mn jobs  Some interventions required to address creation of remaining 2.3 mn jobs or 209,000 per year.  If created by public procurement – very serious financial implications (eg. @ R50,000 per job, would cost R 10bn per year, on additive basis) Gov’t and ANC have unemployment goal = ½ unemployment by 2014  This would mean unemployment at about 15.3%  Would require generation of R 4.1 mn net new jobs or avg of 372,000 jobs created annually.  Estimate that economic growth & existing interventions could result in 1.8 mn jobs  Some interventions required to address creation of remaining 2.3 mn jobs or 209,000 per year.  If created by public procurement – very serious financial implications (eg. @ R50,000 per job, would cost R 10bn per year, on additive basis)

8. Some alternative sources being debated = ?  Infrastructure  Expanded Public Works Programmes  Expanding social services  Social security – esp for shortfall  Recognise complementarity in spending to meeting basic needs & creating employment  Infrastructure  Expanded Public Works Programmes  Expanding social services  Social security – esp for shortfall  Recognise complementarity in spending to meeting basic needs & creating employment

9. Construction expenditure – projections (deflated)

10. Ability to deliver??? Actual and Planned Capital Expenditure of Local Government 1996 – 2001 Source - Eskom

11. Expenditure on ECD & HIV Home Care (deflated)  Huge need, room for expansion, massive employment creator  Approx. 1.8 million people in formal community services (vs. approx 250,000 in construction)  Complementarity – ARV roll-out, orphan care, home care, ECD, etc 2003/4 - 2005/6 estimates

12. Social Security

13. Household access to wage income Year households with wage-earners (m) % of households with wage-earners 19956.271.3% 19975.963.3% 19985.963.4% 19997.467.9% 20007.870.1% 20017.568.5% 20027.266.0%

14. Many poor households rely entirely on grants  Poorest 20% of households:  19% have grants as main source of income  Next poorest 20% of households:  28% have grants as main source of income  Poorest 20% of households:  19% have grants as main source of income  Next poorest 20% of households:  28% have grants as main source of income

15. Social Security Spending Grant TypeNumber of beneficiaries Amount p.m. Old Age Pension 2.0 mn1.40 bn Disability1.1 mn0.78 bn Foster Care0.18 mn0.09 bn CSG3.8 mn0.60 bn Source: SOCPEN October 2003

16. Old Age Pension Level of grant is more than twice average per capita income for Africans Generous by international comparisons (1.2% of GDP) Take-up is very high (close to 100%?) Gender sensitive – more than twice as many women as men get the grant Reaches many households with children Level of grant is more than twice average per capita income for Africans Generous by international comparisons (1.2% of GDP) Take-up is very high (close to 100%?) Gender sensitive – more than twice as many women as men get the grant Reaches many households with children

17. Old Age Pension

18. Child Support Grant HSRC estimates that there are 6 million potential CSG beneficiaries under the age of 9 Only 3.8 million have registered to date, but Registrations have been increasing dramatically – more than 1 million children added since March 2003 alone HSRC estimates that there are 6 million potential CSG beneficiaries under the age of 9 Only 3.8 million have registered to date, but Registrations have been increasing dramatically – more than 1 million children added since March 2003 alone

19. Disability  Number of beneficiaries grew by 36% between February & October 2003  Regional variation suggests that take- up may continue to grow:-  e.g. in Limpopo 3% of adults receive disability grant vs 7% of adults in Eastern Cape  Number of beneficiaries grew by 36% between February & October 2003  Regional variation suggests that take- up may continue to grow:-  e.g. in Limpopo 3% of adults receive disability grant vs 7% of adults in Eastern Cape

20. Foster Care  180 000 children currently  Growing slowly: AIDS orphans may  pressure Roll out of ARV should slow growth  180 000 children currently  Growing slowly: AIDS orphans may  pressure Roll out of ARV should slow growth

21. Concluding remarks  Balance between social security & employment imperatives could have serious budgetary implications in future  Required job creation to meet employment targets could cost R 10bn on additive basis.  Potential for policy complementarity  Fiscally sustainable?  Social security --- o Extended Child Support Grant. o The aging of the population o The impact of AIDS illness o Are we effectively counting potential beneficiaries? What are the possible cost implications?  Balance between social security & employment imperatives could have serious budgetary implications in future  Required job creation to meet employment targets could cost R 10bn on additive basis.  Potential for policy complementarity  Fiscally sustainable?  Social security --- o Extended Child Support Grant. o The aging of the population o The impact of AIDS illness o Are we effectively counting potential beneficiaries? What are the possible cost implications?