Rising out of Poverty in South Africa: Risks Faced by the Poor and Vulnerable

Head Shot Photo of Graduate Center Stone Center presenter Murray LeibbrantMurray Leibbrandt, a professor in the School of Economics at the University of Cape Town, will present his study, “Snakes and Ladders and Loaded Dice: Poverty Dynamics and Inequality in South Africa Between 2008-2017,” on April 15 at a seminar hosted by The Graduate Center’s Stone Center on Socio-Economic Inequality. This is the final presentation for the 2018-2019 academic year in the Stone Center’s annual Inequality Seminar Series.
Leibbrandt recently spoke to The Graduate Center about his work. He said his study finds that despite talk of “an exploding middle class” in South Africa, a large number of people being counted as middle class often slip in and out of it. “This large group of vulnerable individuals challenges the notion that those below the poverty line at any point in time are the only appropriate targets for policy,” he said.
Graduate Center: What are the benefits of doing a longitudinal study?
Leibbrandt: A longitudinal study allows one to explore social mobility and, in particular, to look at transitions in and out of poverty and at those who remain in poverty.
Cross-sectional data is widely used around the world to measure poverty rates: it’s very useful, and it’s the type of information that inputs into sustainable development goals. But if I want to understand the underlying factors that led particular groups to remain trapped in poverty while others moved in and out or took off on a positive trajectory, I need longitudinal data.
We’ve got this excellent panel survey in South Africa called the National Income Dynamics Study (NIDS), which has followed about 30,000 South Africans from 2008 to 2017, with five visits during that period. This can augment the analysis from very good cross-sectional data produced by Statistics South Africa.
Using NIDS, we can track the direct causes underlying the cross-sectional picture. And what we find is that those who are in poverty repeatedly are those who are not connected to a labor market. For example, a household might have only retired and young people in it. Such a household is not uncommon in South Africa. Or perhaps the household includes working-age people, but they are unemployed. Generally, those households are in rural areas quite far from labor markets. They need a type of structural intervention to shift them onto a different life path.
Even if those individuals get a social support grant from the government, that’s not enough to leverage a livelihood that pushes people out of poverty.
GC: That leads into what you’ve written about poverty persistence, which you define as “the extent to which the experience of poverty in South Africa is sustained over time as opposed to being a transient, short-lived state?” What have you found is that extent?
Leibbrandt: Astonishingly, we found that if you were deep in poverty, meaning that you were below the level of having only enough money to buy food, in one of the waves from 2008 to 2017, then there is a 63 percent chance you will remain there.
In other words, 63 percent of the people who were very poor are still very poor. Only 10 percent of those who were very poor rise above the [official] poverty line that includes food and non-food components.
We also found there is a large group of South Africans who might be less poor in one wave, yet by the next they have slipped back into poverty. Just under 50 percent are in this vulnerable state: sometimes they are poor and sometimes they are not. It’s a massive group.
This large group of vulnerable individuals challenges the notion that those below the poverty line at any point in time are the only appropriate targets for policy. Somebody might have a low-quality job, but for now they are above the poverty line. If they’re a domestic worker or an agricultural worker or a security worker — poorly paid workers who are also poorly protected — they might fall either above or below the line. Either way, their job doesn’t generate the income they need to invest in their children’s education. And the job itself is not secure. Perhaps by the next wave they’ve lost that job and sunk below the poverty line again and someone else might have moved above the line for now.
South Africa doesn’t have a huge starvation or severe hunger problem. However, people remain poor. They aren’t integrating into the labor market in a way that moves them onto a positive trajectory.
GC: What does your study show about the South African middle class?
Leibbrandt: Everyone recognizes that the middle class is a key group for a society. They are a modernizing class, they’re progressive, and they’re trying to do their best for their children.
But to behave like this, they need the income stability to be forward-looking. You need to be able to think about investing in the education of your children, because you’re not looking over your shoulder all the time, fearing that you’ll fall back into poverty. You can think about taking out a loan to buy a house, even if it’s a small rudimentary house, because you can service a loan over the next five or 10 years. If you’re middle class, you’ve got a sense that you’re on your way in the new South African society.
On the economic side, we define the middle class as a group with a very low probability of slipping into poverty. In contrast to the vulnerable, they have better quality jobs with greater stability. In South Africa, this group is just under 30 percent again.
South Africa was supposed to have had this exploding middle class. There’s lot of language in South Africa about the black diamonds, as the market researchers call the black middle class. None of the work I’ve been doing over the last 10 or 15 years has resonated with that. That’s not the story South Africans were telling me.
Our study said: This talk about the bourgeoning black middle class is nice, but it’s not the reality of our country. People are counting the vulnerable as the middle class. But the vulnerable don’t perceive life like the middle class. They’re not comfortable with the new South Africa. It’s not working for them.
So, South Africa and many African economies have grown, but not in an inclusive way that’s led to growing middle class stability.

Submitted on: APR 11, 2019

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