UBI OP-ED
Universal basic income is the answer to providing a solid unemployment social assistance system
South Africa needs an unemployment system overhaul. Income needs to reach the working-age population. It needs to be a decent level of income to meet basic needs and stimulate an economic revolution by creating millions of active consumers of the unemployed able to support local micro businesses.
There is a constitutional guarantee to every person in South Africa that they will have enough income to live from — the right to social security. However, for poor working-age unemployed people, this guarantee has never been realised. It is high time that we stopped hoping for jobs to fall from the sky for the unemployed millions in South Africa and began to design and pilot schemes to provide adequate income for the currently unwaged.
Looking at the options that exist, the easiest way to do this would be a simple rollout of the universal basic income policy.
On 14 November 2023, StatsSA’s 3rd Quarter 2023 Labour Force Survey provided government with welcome headline data. Employment had grown and unemployment had fallen. But even with the 2.4% rise in employment, South Africa still has almost 12 million adults unemployed and excluded from contributing to economic activity or able to meet their basic needs.
Many people dismiss the idea of a welfare state that provides income to the unemployed — the so-called ‘dole’, like in the UK.
With a population of 67 million people in 2022, the UK had a narrow unemployment rate of 3.6%. 60% of the population was employed. 0.5% of the population fell below the global measure of extreme poverty of $2.15 per person per day. Inequality measured at a Gini of 32.6%.
GDP growth was 4.1% in 2022, central government debt to GDP ratio was 186.5%. Social insurance contributions were 19.6% of revenue.
South Africa in comparison had a population of 59 million in 2022. 20.5% of the population fell below the same extreme poverty measure of $2.15 per person per day. Inequality was double that in the UK, with a Gini of 63%.
29.8% of workers were unemployed, excluding people who had given up looking for a job. Employment was 40%, and the Labour Force Participation rate was 57%.
GDP growth in 2022 was 2%, government debt was 75.6% of GDP and yet social insurance contributions were only 1.2% of revenue.
South Africa has a warped social security system.
Little to no unemployment cover
Formal sector workers are covered under the UIF, private pensions and medical aids, receiving services akin to workers in high income countries. But the UIF covers very few unemployed workers. This is a direct and untransformed legacy of Apartheid where only white workers were extended ‘civilised’ working provisions. But unlike in high income countries, in South Africa, there is no tax-funded income scheme for poor and predominantly black unemployed people in South Africa outside of the UIF.
But even the system of UIF for those 61% of workers who are covered is wholly inadequate. Members are only entitled to 365 days if they have worked for five full years, and yet the awful nature of unemployment in South Africa is that it is structural, it is not a passing thing.
75% of the unemployed are in long term unemployment. In other words, they have already been unemployed for more than a year. All UIF payments by then are already finished, if they had any to begin with. Moreover, 42% of the unemployed are new job entrants who have never had a job and so could not have contributed to the UI Fund.
Systems of social security globally are either funded through contributions, like the UIF and private pension schemes, or financed from tax — mostly VAT and income taxes.
SRD grant not adequate
The R350 Social Relief of Distress (SRD)/Covid grant was a lot of things to a lot of people. But it is not an adequate unemployment assistance scheme. This grant has been the most piecemeal of policies. It is not a permanent income scheme, but gets extended at the apparent whim of the Minister of Finance from time to time.
The amount of the grant is still stuck on R350 per month, which means that it has lost about R15 or 21% of its purchasing power each month since 2020. If the SRD grant had just kept pace with inflation since its introduction, it should be R429.13 per month today.
The SRD is described as a temporary solution (solution to which temporary problem?) and yet 52% of the 14.7 million people who applied for the R350 grant in June 2023 had never worked before.
Given the extremely high levels of permanent (structural) unemployment, an incredibly small number of the unemployed will ever have their needs met through the UIF. And yet the numbers tell us that there is a massive need for income given that 14.7 million adults went through the hassle of applying for an income grant of R350 for one month.
South Africa needs an unemployment system overhaul. Income needs to reach the working-age population. It needs to be a decent level of income to meet basic needs and stimulate an economic revolution by creating millions of active consumers of the unemployed able to support local micro businesses.
Introducing recipients of income to livelihoods and employment opportunities (active labour market policies) in an enabling rather than punitive way might further transform people’s lives, the economy and thus the fiscus.
Scheme design is critical and must be done right. The answer certainly does not lie in the arbitrary piecemeal extension of the R350 payments. The simplest way to proceed in a way that limits errors of exclusion would be to implement a decent Universal Basic Income and use the efficient SARS system to tax it back from those whose earnings exceed a certain threshold.
Who could argue against a provenly affordable scheme? DM
Isobel Frye is the founding and Executive Director of Social Policy Initiative (SPI) in Johannesburg. SPI uses research and analysis to advance critical thinking and policy development about universal social security as a way to advance human rights and dignity, and reduce poverty and inequality in South Africa.
Isobel serves on the Academy of Science of South Africa Standing Committee on Science for the Reduction of Poverty and Inequality. She is a national Commissioner on the National Minimum Wage Commission. She has served on the Boards of a variety of national and regional bodies. She serves on a global strategic advisory body for a leading ecumenical development agency. Isobel is a former member of the UIF Board, and is a current representative of Community Constituency at Nedlac.
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“. . .use the efficient SARS system to tax it back from those whose earnings exceed a certain threshold.”
The main problem, how less than 20% of the population is supposed to finance not only UBI, but everything from NHI to power and water for everyone, is covered in this entire article with this one sentence. Some others have made calculations that make impossible assumptions and conveniently ignore all other social spending (including the impending doom called NHI), and it somehow seems impossible for activists to understand that you cannot tax a shrinking middle class to pay for all this.
If only you could put that misguided passion into moving the ANC government to stop corruption, BEE procurement fraud, get power, water and transport sorted and with it jobs and economy etc etc, then maybe we could move this country into a position where we could actually help people. But the issues we are facing cannot be solved with higher taxes in what ever form they are suggested.
Yes, I have read the IEJs suggestions how this is to be funded and remain unconvinced, along with many actual economists. For crying out load, we can’t even fund the 350 Rand SRD properly.
“Who could argue against a provenly affordable scheme?”
Its neither proven in any way, nor affordable. Its a bunch of assumption with no proper study or pilot in this country. Any comparisons to other countries are simply not applicable here when comparing GDP, unemployment and other metrics. Why the disinformation?
9%!!! 9% of the population or a measly 5.2 Million people fund over 40% of SA’s total tax revenue
I will say that for it’s a sad day for society to ponder the effects of a minimalistic stipend to ease the suffering of the masses when the tax structures of the government are designed to effectively strip income from individuals and companies to fund corruption, narrow based opportunistic so called transformation and plunder. Why pay taxes if the bulk of money is squirreled out of the fiscus to make a few fabulously rich individuals with no service delivery.
We need less taxes and less draconian laws so that we create more jobs at R2000 or more per month rather than bargain on R500 pm stipends. Why pay
a) vat
b)PaYE
c) UIF
d) SDL
e) Rates
f) Transfer Duties
g) Company Tax
h) Individual Tax
I) Fuel Tax
j) Sin Tax
h) Sugar Tax
I) Oxygen Tax ( coming) to fund
a) MPs lavish lifestyle
b) every rand/c spent on tendepreneurs handouts and state capture and every rotten deal
c) no service delivery
d) No infrastructure
e) failing health, education and security and public enterprises and SOEs (don’t know why these dinosaurs are still trodding the earth)
Put money into businesses, entrepreneurs hands by decreasing taxes, PAYE, VAT and encouraging business growths. Those business will create jobs, will create more business opportunities and more economic growth.
We need only 6 govt depts
a) Health
b) Security ( SAPS and SANdF combined)
c) Homeland Affairs
D) education
E) Trade and Industry (including labour)
f) Environment
We will create so many jobs it will make the dole redundant..
Isobel, explain who can afford this extra tax? It would push more people into poverty. Also the tax payers who can leave (the minority of tax payers who pay the majority of tax) will leave. Then there is less tax to fund your UBI. Wouldn’t it be better if the government relaxed labour laws, allowing employers to take the risk of hiring inexperienced youth? This would create millions of jobs.
Government are all Deaf to intelligent words!
Sure, no problem.
Put up the cash.
Forget about universal income … it won’t change anything!
The CAUSE of poverty is over population. Too many people for the available jobs, houses, food, water, air ….
The only strategy that will improve living conditions in SA is to PREVENT poverty by reducing the number of people.
To prevent joblessness, starvation, violence and suffering in the year 2043, unplanned babies must not be born TODAY!
Do what the Chinese did!
IF ALL THE ILLEGAL FOREIGNERS GET KICKED OUT OF SOUTH AFRICA, THEN THE REAL UNEMPLOYED PEOPLE CAN BE LOOKED AFTER AND IF WE CAN GET AN EDUCATED GOVERMENT IN PLACE NEXT YEAR, SOUTH AFRICA CAN THRIVE AGAIN!!!
The foreigners are the most productive of all the indigenous people of Africa and South Africa.
Plus they work more for less without any strikes and violence.
Put that in your pipe and smoke it.
The attitude of entitlement has to be changed to think and roll your sleeves up!
Read this person’s resumè again. With advice like this in many influencial organisations it is no wonder South Africa is doomed. We need jobs, employers and enterpreneurs but not an open purse
Bla bla bla
The other people’s money has pretty much run out Isobel.
So, I may produce as many children as I want since others will pick up the consequences. The poor continues to exacerbate poverty and that’s OK?
Fix the redistribution system first where 50% of taxes is not lost to corruption theft and fraud. Freeze exorbitant public and SOE sector wages and dimiss all redundant staff. Put them on your basic income grant of R1000 instead of paying them R60000 on average.
More compassion from politicians and rich people, and the world would be paradise.
Many proponents of BIG argue that it will stimulate the economy. So why stick to R3000pm? Imagine the boost to the economy of R10,000 pm… :/
In most countries with BIG, all workers contribute to that fund each month. It is a deductible unrelated to income tax levels. Will the 20 million employed happily pay R500pm as social welfare deduction? You know : ubuntu and an injury to one etc etc etc.
We should up VAT to 20% as it is the simplest to implement and police.