 Good afternoon It'll be a bit more demanding on you than than the previous presentations. I'm gonna Skip through some things Really really quickly to try and show you What what we've got in the country, but but a bit more on on what we've been trying to do So how we've tried to understand South Africa's inequality and And what still needs to be done. So I'm motivating South Africa's part of this Giants project. I'm not sure we're a giant Certainly a giant of inequality. So in that sense we We belong in the project on That note I could say that this this picture of three densities Is as as close as I get to to profiling South Africa's inequality? and Although you wouldn't know it profiles a very high inequality country with a genie coefficient in income terms and and the analysis is an income Of around point six seven So it's not quite at the point seven for that transfer I was talking about that he's never seen before luckily But is extremely high and has remained resiliently high over the post-apartheid period even in a climate in which We've had between two to three percent stable growth over over quite a long time since 1994 But and so poverty has come down a bit As you may or may not be able to see in in these distributions 1993 was a survey that was done on the on the sort of advent of the post-apartheid era And you can see that the that the densities move to the right at the bottom But They also move to the right at the top With some interesting movements in the middle. So so that's a that's a intriguing Picture about inequality And so how have we understood this we've got a resilient Lehigh inequality in the country in income terms in non-money metric terms It's been a a much different story actually and So I took this out of some work that's been done on multidimensional poverty, but it just shows on various dimensions Again using household survey data improvements from 1993 to 2010 on a number of dimensions The the the dark blue bars on 1993 the lighter gray ones are 2010 And you can see that these are deprivations. So being smaller is good Okay, and you can see huge improvements in nutrition mortality years of education enrollments water sanitation fuel electricity assets and indeed We've done we've done some Theoretical work. It's quite hard to turn those those multiple deprivation indices into inequality measures we've done some work on that and What this shows? Using similar rents curves of of an asset index is huge improvements in inequality on the asset side So income inequality is resiliently high asset inequality largely through delivery from the state has improved greatly Here's a slightly different take it looks at different income components and their importance across the distribution And how that's changed over time in South Africa So I've got the income deciles at the bottom here One to ten In 1993 and then it's the share of income going to household at different levels of the different deciles and How they've changed over time. So just for example, if you look at the at the bottom decile in 1993 Labor incomes providing 30% of household per capita income Then huge income from remittances if you know anything about the economic history of South Africa whether it's migrant labor That's that's not unexpected Some income from government transfers, which is social grants and then other And that changes dramatically as you move up the distribution You can see that that the labor market plays an absolutely central role in the incomes at the top end and Remittances less and cash transfers less, but it's the change that's fascinating here In particular You can see two things I'd like to do your attention to two things one is the contribution of the labor market at the very bottom It's been a problem in South Africa Especially in terms of rising levels of unemployment, but even in the quality of wage income going to the bottom deciles to is this massive Triangle here, which is the extensive rollout of social grants in the post-apartheid system And so you can see how important they are at the bottom end of the income distribution So again, that's been a state-led initiative But this time that's changed incomes, right not just assets So how do we push on with that? I've only given you a snippet. There's much more to talk about. I'm sure But what are the stories that that people have put together to explain all of this? Well, there's some there's some macro stories about world growth To two to three percent is not enough. We've got a sort of a target five to six percent Growth rate that many of the macro simulations have have Speculated is what we need on a sustained basis for growth to start and employment creation to really take off in the country I'm flagging that as an area in which very little work has been done actually and To to mesh with Francois story about how South Africa's integrated into the world economy Over this period of our fundamental change as we saw also very underdeveloped and Then there's there's a range of other more micro based things on which we have pushed on a bit But there's much more work that needs to be done and we'll be doing under the giants About social grants labor market failures Returns to to state expenditures and returns to education. I Really want to to to flick through these use them as indicative and just talk to them quickly So we've done enough work on South African education system to show that the What's happened in South African schooling and education is that the returns to everything below complete secondary have collapsed very much like a skills twist in in the US labor market for example, but from complete secondary up the returns Complete secondary have been pretty constant above that have risen dramatically and that's been a source of of dry That's driven inequality and earnings and employment in the South African labor market But we need to do more to link that formally into understanding changes in the earnings distribution We've done quite a lot of simulation work to try and work out. Okay. What has the impact of social grants being on inequality? I don't even try to process that that slide take my word for it It makes it makes two points that we we find a mildly improving effect of social grants on on Inequality we find a dis-equalizing effect of the labor market and These are these are some of the techniques coming out of Latin America particularly Ricardo Pais de Barros and Chico and others The demography counts to and needs to be considered in these simulations Okay, what about the state what about the the role of government expenditures I've spoken about the cash transfers being massive Well, have they had an impact? Well, we've been involved in a lovely project with nor elastic Ingrid Willard my colleague is the is the principal South African on that And really the question is does the fiscal system decrease inequality and it's a precise methodology That Norris developed and we apply in South Africa the fiscal incidence analysis and Really you mesh household survey data with With administrative data with how government is actually allocating its budget How much they spending etc to try and see whether expenditures are appropriately allocated a few quick graphs This is about this is about the tax system. First, there's a little rents curve Of market income shows you how South Africa is extremely high inequality in market income, right? So Then this is the this is the concentration curve. So the the tax distribution income tax paid by organized by deciles and You can see that that the the upper deciles pay From from about there pay nearly all of the tax Well, that makes sense in a sense because they they're earning all of the income but This is the this is so it's progressive in a sense But what does progressive mean when you've got inequality like South Africa's got that's the issue that gets raised by by this graph because this space here implies That there that there isn't much room for to have a huge impact on on inequality and in fact we find That the redistributive impact is less so than in other countries So this is a particular index Located internationally and shows that we don't do particularly well now. That's a consequence of our extreme inequality but we do what much better when you start feeding in to whom the social expenditures are targeted and so The careful work that was done by this team First takes the this then is the tax impact and it's it's pretty small The direct taxes then if you move to to the transfers you add in the social transfers, this is a big jump That the actual state's Grants add there's a child support grant. There's an old age pension. It has a big impact Then if you add the indirect taxes it It's actually mildly Disequalizing again and then but then if you price in the actual value of the services going to education health, etc Again, it's strongly redistributive So it's an interesting story And it makes a big difference to the Gini coefficient If you that's what this diagram does, but there's a fallacy that's perpetrated in South Africa a lot where big favorite of the policy community in particular Who say okay? This is really our Gini coefficient point five nine rather than The this is this is really the one that we were measuring before actually That's the standard measure that you that you measure Well, and so South Africa is not so unequal as it looks well You've got to compare apples with apples So if you want to take this particular inequality measure, which does show that the state has a redistributive effect Well, you've got a benchmark it against Other countries that that do the same so here we've got a The a flagging of the fact that actually South Africa does have a very active Change in the Gini as a result of its policies But actually if you benchmark against the country for example Apples with apples. So if you wanted to start with Brazil, which is the purple line here That's where you start and you can see that they are different in their texture and it's worth understanding those differences This is well worth understanding, but then you must compare that Gini to to that Gini over there Okay, I have to stop. So where are we going with this? Well, there's much more work. These are these are broad findings at at the sort of aggregate level that one needs to probe The one area where we we're going is in this top incomes issue and And we're linking in in a collaboration with a South African revenue services to merge in as Francois was talking about The admit the data from the tax side with the household survey data to try and see whether the top end Can be improved We have 20% sample of assessed taxpayers as Francois indicated It's indicating it's not that easy to merge in but there's some some promising results at the outset What did we looked at some? Top income of tax units Okay for individuals 15 plus And and looking at these income cutoffs at the very top end of the income distribution and met matching that matching the income and expenditure survey of the of the state with With the income cutoff from SARS and you can see it's very promising up to a point. It's intriguing this 253 Purchasing power parity Dollars and 249 is very close that shows a very close match, but then right up at the top It shows that there's something there something worth interrogating and the perfect advertorial if you like for For this project with the Giants. Thank you