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SA’s basic income versus jobs debate: a false dilemma

Once considered a utopian ideal, a basic income guarantee has become a distinct political possibility.
An unemployed man collects trash for resale in Diepsloot Johannesburg. Calls are growing for a basic income grant for poor South Africans. Image: EFE-EPA/Kim Ludbrook

Once considered a utopian ideal, a basic income guarantee has become a distinct political possibility, as the South African government scrambles to respond to growing hunger, and anger in the face of the COVID-19 pandemic. Spurred by recent unprecedented riots, the state reinstated the “social relief of distress” grant, after it was terminated at the end of April, until March 2022. Furthermore, it expanded the R350 (US$23) monthly payment to caregivers, who were previously excluded.

The C-19 coalition, made up of community groups, trade unions, NGOs and social movements, has called on government to transform the grant into a monthly basic income guarantee of at least R1268 (US$85). This is equivalent to the upper-bound poverty line. There are calls for a guarantee rather than a grant and to reframe the transfer as a right based on citizenship, rather than a government gift to the deserving few.

President Cyril Ramaphosa recently affirmed government’s commitment to considering a basic income grant, stating that:

This will validate our people and show them that we are giving serious consideration to their lives.

But, not all within the government agree.

New finance minister Enoch Godongwana has warned against fostering dependency among youth in particular. He has emphasized the importance of investing in skills instead.

What we need to do is invest in skilling these kids, and obviously, they will have some cash which will be a stipend or per diem. And in addition let’s get them better development of skills.

However, skills training alone cannot address the problem of structural unemployment. South Africa’s unemployment crisis reflects decades of sluggish growth, declining investment in productive sectors, growing capital intensity in key industries and the casualisation of standard employment relations.

Ultimately, the basic income versus jobs debate is a false dilemma. After all, redistribution and production are two sides of the same coin. A publicly funded basic income would not only provide much needed relief amid high levels of poverty and inequality, but has the potential to increase demand for consumer goods and services, thereby boosting economic activity and increasing investment. This dynamic of basic income is well accepted by American billionaire backers.

However, basic income is not a magic bullet of itself. It must be embedded within a broader strategy of economic transformation, buttressed by progressive social forces.

Structural unemployment

The finance minister’s concern with giving something for something has been a recurring theme in debates on welfare globally. Historically, decision-makers have been drawn to schemes which oblige the poor to work because they’re considered effective in imposing order, funnelling the dispossessed into ultra-low-wage labour and dissuading further claims on the state.

Interestingly, study after study shows that South Africa’s unemployed – 43.2% of the working age population, according to the expanded definition – would also prefer not to depend on the state and aspire to a proper job. The problem is that proper jobs, with standard employment protections, are increasingly scarce.

Indeed, between 1995 and 2021, youth unemployment rose from 28% to 63%. But even those lucky enough to find a job, cannot necessarily meet their basic needs. Prior to the introduction of the national minimum wage in 2018, 54% of full time workers earned below the line of working poverty.

While some try to cobble together a livelihood from informal activities, these are largely survivalist and insufficient to make ends meet.

In the last quarter, discouraged job seekers increased by 6.9%. One reason is the exorbitant cost of looking for work, including: accessing information, submitting applications, travel costs and skills training. These place an additional burden on households already struggling to survive. A basic income guarantee could partially address this problem.

The case for a basic income grant

South Africa has one of the most expansive social grants systems in Africa. It reaches more than 18.5 million people or almost third of its population.

While grants have significantly reduced the incidence and severity of poverty, they exclude the unemployed, placing a burden on existing recipients, and effectively eroding the value of the transfer.

Proponents of a basic income guarantee argue that it would fill the cracks in South Africa’s social security system. Furthermore, it could support activities outside of the labour market such as care work, and establish a reservation wage below which workers could refuse to work, strengthening their bargaining power.

In addition, proponents argue that because the basic income guarantee would apply to all, it could foster social cohesion while avoiding the costly targeting processes inherent in means-tested-schemes. Meanwhile, its unconditional nature would prevent the state from coercing recipients into ultra-low wage work, as has been the case with South Africa’s public works programme.

Of course, like the national minimum wage, the impact of a basic income guarantee would hinge on the value of the benefit and how it is structured.

Rethinking redistribution, reclaiming production

Recent projections by the Institute for Economic Justice, a progressive policy think tank, suggest that a monthly basic income guarantee of R840 (US$58) – which corresponds to the lower bound poverty line – could be easily funded through tax revenue, using a phased approach.

With increased revenue from VAT recoupment due to increased consumption, and the introduction of a wealth tax, a basic income grant would be affordable for the entire adult population.

Nevertheless, critics are right to point out that production matters. On the one hand, production generates the revenue required for redistribution as well as goods and services. On the other, redistributive schemes contribute to capital accumulation through increased demand for goods and services, thereby shaping the organisation of production.

Ultimately, what is produced, how it is produced and for whom are critical questions. One of the pitfalls of the global debate on basic income is that it has tended to ignore struggles around the organisation of production at precisely the moment when it is most urgent to contest the casualisation of labour.

As history has shown, if redistributive reforms such as basic income are not paired with labour, social and consumer protections, their impact can be easily undermined.

Conclusion

Ultimately, the basic income versus jobs debate represents a false dilemma. Redistributive reforms have the potential to increase demand for goods and services and wealth accumulation. This, in turn, can drive investment and generate jobs, while creating the basis for further redistribution.

But, progressive proposals for basic income must conceive of it as part of, rather than a replacement for, a broader set of reforms aimed at decommodifying life under capitalism and improving the conditions of work.The Conversation

Ruth Castel-Branco, research manager, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Typical useless academic waffle.

MW needs to be MUCH more careful about the quality of the stuff it CHOOSES to be published on its portal.

This is garbage.

Indeed, typically written by a social scientist, maybe with a BIG heart, and good intentions, but without any deep, thorough understanding of real economics.
More social grants will increase the already widely spread Mahala mentality, more commonly known as the culture of entitlement.
Money does NOT grow on trees.

I am a major proponent for UBI, however it cannot be correctly funded whilst we have Social Support. Both of these systems are contradictory and you cannot have one whilst the other is in place as it defeats their respective purposes.

A Social Support Systems scope is to ensure everyone has access to predetermined services which they cannot procure for themselves. Generally these products and services are provided by the government and charities.

Universal Basic Income on the other hand allows the individual to determine which products and services will best service their need.

In 2019 South Africa spent R204Bil on social welfare which excludes hospitals; schooling et cetera. This figure is equal to R1,380 per person per month for 12.5mil people.

R204bil divided by the cost per job of R620,000 would mean that 329,032 jobs could have been created. The average South African has 3 dependants meaning almost 1,000,000 people could have been taken out of poverty.

In 10 years SA could have almost wiped poverty…

“R204bil divided by the cost per job of R620,000 would mean that 329,032 jobs could have been created.”

This is a wholly fictional metric!

ANY job created or sustained by an ARTIFICIAL dependency on a gift of charity or taxation, is NOT a real job. It is instead a dangerous illusion of “success”.

A “real job” depends on fulfilling a REAL need … does NOT need to be subsidised … and the product it produces … pays for its own cost. Handsomely!

In 10 years SA could have almost wiped poverty…”

Never going to happen with the type of aimless, ill-disciplined “let’s just throw money at the problem and see what sticks” approach outlined above.

What will happen instead is that the number of UBI dependents will grow exponentially. And why shouldn’t they?

Then ultimately, the whole pack of cards will fall apart when the money forcibly taxed from the FEW genuinely productive citizens in the economy, becomes insufficient to fund the MANY “pretenders” dependent on these fictional artificial jobs.

There is a better way.

There would be a quicker, more permanent, and FAR BETTER RoI if these same billions were spent instead on incentivizing small, nuclear families.

This would produce MARKEDLY better and more accomplished future citizens, than “the poor” are currently producing.

“Redistributive reforms have the potential to increase demand for goods and services and wealth accumulation.”

You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for that my dear friend is the beginning of the end of any nation. You cannot multiply wealth by dividing it. – Adrian Rogers

And look at the States.

Companies can’t find employees because many do not want to work because they earn more doing nothing, thanks to the CV relief funds.

Well put. Academics can only do one side of the arithmetic sum it seems. Note this paragraph:

“With increased revenue from VAT recoupment due to increased consumption, and the introduction of a wealth tax, a basic income grant would be affordable for the entire adult population.”

Raise taxes from already uncompetitive levels and rely on the VAT from “increased consumption” (aka, picking yourself up by your own boot straps). This will surely work – where has it ever (in a third world country)?

Ironic how the left leaning academics and unionists miss that their motivation for a basic income grant is effectively an admission that their economic policies over the last two decades have failed to uplift the poor and generate meaningful employment.

This comment is just too much “Redistributive reforms have the potential to increase demand for goods and services and wealth accumulation.” It shows a complete lack of basic understanding of the wealth generation processes. The acedemics at Wits don’t have a clue. Excessive redistribution is the cause of our economic calamity. The government has been stripping productive citizens of their capital for years, and consequently new business formation has been severely constrained. UBI will reduce savings in the economy, and further constrain new business formation.

End of comments.

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