Households earning a household income in the top 20 percent, 10 percent and even the top one percent claim all types of grants available to South Africans. Having access to these grants causes the lowest household income earners an increased level of life satisfaction, but in contrast, it decreases the life satisfaction of the highest household income earners.
These are the results of a study by the Well-being Economic Research team at the University of Johannesburg in collaboration with an international team, comprising of Prof Talita Greyling, Dr Tam Adhikari (Research Associate) and Dr Stephanie Rossouw (Senior Research Associate).
Their study used the National Income Dynamics Study (NIDS) dataset, a well-known representative dataset of South Africa, surveying individuals and households. The NIDS survey has been conducted every two years, since 2008, with the latest data published in 2018. However, considering the increase in annual grant claims and the trends over time, it is most likely that this practice has been ongoing.
The study involves 42000 households pooled over the five years in which the surveys were conducted. We sort all the households from the lowest income earners (household income at constant 2014 prices minus grant income, to place the households in the position in which they would have been if they did not receive grants) to the highest income earners and divide the households into five equal parts (quintiles) and then study each group of 8400 households, from the lowest income group to the highest
Figure 1 shows the median (the income of the household in the middle of the group) and the average income per household income quintile. As can be seen, the income distribution in South Africa is extremely skewed. The median income, that is, the income of the household in the middle of the group is in most cases much lower than the average income of the households in that group (an indication of a skewed distribution).
Figure 2 shows the percentage of households in each group (quintile) that accessed any type of grant paid by the government. In the lowest quintile, 85 percent (85 households out of 100) of the households claimed grants whereas, in the top 20 percent earners, 37 percent (37 out of 100) claimed grants, in the top 10 percent 28 percent claimed grants and even in the top one percent 10 percent of the households claimed grants.
Considering the type of grants accessed over the years by the different groups (see table 1), we notice that households in the highest income group (quintile) accessed all types of grants and that this trend has increased over time (see figure 3). Especially the child support grant, 0.4 percent of the top 20 percent households claimed the child support grant in 2008/9, but this increased to 10 percent of the households in the top 20 per in 2017, this implies an increase of 24 percent over the time period. A similar trend can be seen in the old age grant.
Table 1: Trends over time in the lowest income groups and highest income group
|||Quintile 1 (lowest 20 percent households ||Highest 20 percent houeholds |
Furthermore, the team interested in the well-being effects of claiming grants used different econometric models (Ordered Probit Models and Propensity Score Matching) to determine if accessing grants indeed increases the well-being of households. As expected, they found that the life satisfaction of the households in the lowest four groups (quintiles) did increase, but surprisingly the life satisfaction of the households in the highest income group decreased. That means if a household is one of the top earners of income and they claim a grant it makes them unhappy.
If we consider households in the top quintile, their median income is 66 times more than the lowest income earners. Thus, a ratio of 1:66 meaning that for every R1 earned by the lowest quintile, the top quintile earns R66. In contrast, if we consider the number of households that access grants, the ratio is 1 (lowest quintile):0.41 (highest quintile). In other words, for almost every two households that claim a grant in the bottom quintile, one household in the top quintile claims a grant. Clearly, something is wrong with the system. If grants were introduced to decrease poverty, this goal might have been accomplished. However, instead of decreasing inequality, it most likely ended up having the opposite effect, increasing inequality.
How is it possible that the highest income quintile households can access grants aimed at the poor? To qualify for most of the grants, an individual or married couple must pass the means test. Given that the means test is based on a certain level of income or assets of an individual (if the person is married, the means test doubles) it is likely that a household member can earn an income below the means test even though he/she is a member of a household that earners an income in the top 20 percent of households, which legally gives them the right to access a particular grant. Households in the highest quintile can also claim the Foster Care grant, which has no means test and is accessible to all. Obviously, another concern that the South African Social Security Agency (SASSA) (2020b) revealed is various fraudulent activities related to claiming grants when you are not entitled to claim. This fraudulent behaviour has increased over time as the ease of bypassing requirements is common knowledge.
Thus, even though the system allows members of households earning household income in the top brackets to claim grants, is this fair to the poor and does it contribute to fulfilling the main aim of the Social Welfare System? We believe the system of allocating grants to the most vulnerable should be revisited.