Social security for young people amidst high poverty and unemployment: Some policy options for South Africa

 
Development Southern Africa, 2014
Vol. 31, No. 2, 347 –362, http://dx.doi.org/10.1080/0376835X.2013.873346

Social security for young people amidst
high poverty and unemployment: Some
policy options for South Africa
Miriam Altman1, Zitha Mokomane2 &
Gemma Wright3
South African youth experience extremely high levels of unemployment and poverty. Currently
there is no social assistance for low-income young adults in South Africa unless they are
disabled. Interventions are needed that can achieve widespread poverty alleviation, as well as
help facilitate economic participation to improve lifelong earnings. In this article, six examples
of social security policy options are considered, including five grants ranging from an
unconditional non-means-tested grant for young people to a conditional grant for young people
in training or education, plus an ‘Opportunities voucher’ that is administered through the
social security system but paid out to organisations offering youth education or work
opportunities. Using a tax and benefit microsimulation model to simulate the five grants, we
estimate the potential numbers reached and cost, as well as the impact of these six options on
poverty.

Keywords: youth; social security; microsimulation; poverty; unemployment

JEL codes: I3; I32; J2; J68

1. Introduction
South Africa has a large youth population, with those aged 15 to 24 years making up
almost 20% of the population (DSD, 2010). International evidence suggests that if
most young people are economically active, this youth bulge can offer an opportunity
for accelerated growth and poverty reduction as dependency ratios fall (DSD, 2010;
Gribble & Bremner, 2012). More than one-half of those aged 18 to 24 are out of
school and out of work, and also live below the poverty line (StatsSA, 2010). Much
more substantial policy attention is required to promote their economic and social
participation.
This article presents some of the findings of research to explore poverty impacts of
selected social security options for youth. It is organised as follows: Section 2
provides the context by briefly reviewing the status of South African youth and the
current social security arrangements. Section 3 introduces the social security policy
options that are considered in this article. Section 4 presents findings in respect of

1
  Distinguished Research Fellow, Human Sciences Research Council, 134 Pretorius Street, Pretoria,
South Africa, 0002. Corresponding author: Miriamaltman2@gmail.com
2
  Senior Research Specialist, Human Sciences Research Council, 134 Pretorius Street, Pretoria,
South Africa, 0002.
3
  Deputy Director, Centre for the Analysis of South African Social Policy, Oxford Institute of Social
Policy, Department of Social Policy and Intervention, University of Oxford, 32 Wellington Square,
Oxford OX1 2ER, UK; and Research Fellow, Institute of Social and Economic Research, Rhodes
University, 6 Prince Alfred Street, Grahamstown, South Africa.

# 2014 Development Bank of Southern Africa
348    M Altman et al.

numbers of youth that could be reached through each of these policy options, as well as
potential cost and impact on poverty. Section 5 concludes.

2. Context
South Africa has very high levels of unemployment amongst young people. In 2010, 51%
of 18 to 24 year olds were unemployed by the strict definition, as compared with a
national average of 25.3%; while about two-thirds of all 18 to 24 year olds who were
able and available to work were unemployed by the broad definition (StatsSA, 2010).
More than one-half of all 18 to 24 year olds live under a poverty line of R604 per month
(2011 Rand) and more than two-thirds live under a poverty line of R1113 per month (see
later Tables 2 and 3).
Poverty and unemployment go hand in hand, as demonstrated by the fact that labour
absorption rates of the working-age population in the poorest deciles are very low. For
example, Leibbrandt et al. (2010) demonstrate that only 10% and 19% of the
working-age population in the poorest income decile (decile 1) and the next poorest
decile (decile 2) respectively are employed. The unemployment rates (using the
narrow definition) for these two income deciles were 69% and 46% respectively, and
together these two income deciles possessed a share of just 1.4% of total household
income (rather than 20% if household income was spread evenly across the deciles).
Many young people do not grow up in households with adults in paid work. Hall &
Wright (2010) report that in 2008 over one-third (36%) of children lived in
households with no working adults and 55% lived in a household where no adults
were in formal employment. The depth of poverty faced by youth acts as a barrier
to accessing opportunities. Letseka et al. (2010) found that financial reasons are
one of the main explanations for dropping out of school and university. In 2006,
more than one-third (38%) of African youth aged 14 to 17 said they left school as
they ‘did not have money for fees’ (Sheppard, 2009). Public employment
programmes such as the Expanded Public Works Programme operate at a small
scale relative to the unemployment challenge. The programmes to stimulate
employment in small business and agriculture are still limited in their impact. The
economy is growing too slowly to absorb young people, and they are generally not
the first to be considered by employers. Employment projections show that even if
average annual growth was to rise to 5%, unemployment amongst 15 to 24 year
olds would be 44% and 31% by 2020 and 2030 respectively, in the absence of
special interventions (Altman, 2013).
Although achieving high school graduation and some post-school education is an
important contributor to labour market success, only 21% of African 18 to 24 year
olds had completed Grade 12 or equivalent by 2007, and only 3.3% had completed
post-secondary education. A first work experience is central to exiting
unemployment, yet many young people struggle to access these opportunities. In
2010, only 8% of unemployed youth who lacked experience found a job, as
compared with 25% of unemployed youth who had found some previous experience
(National Treasury, 2011).
The ongoing refinement of policies to assist young people with attaining educational
qualifications, skills and employment is essential but there is also a role for social
security policy. The South African Constitution states that:
Social security for youth amidst high poverty and unemployment      349

      Everyone has the right to have access to [ . . . ] social security, including, if
      they are unable to support themselves and their dependants, appropriate
      social assistance. (Republic of South Africa, 1996: Bill of Rights section 27)

Social security is essentially a component of the social protection floor, which consists of
two main elements: universal access to essential services (such as health, education,
housing, water, sanitation and other services as nationally defined); and social
transfers in cash or in kind, to guarantee income security, food security, adequate
nutrition, and access to essential services (ILO & WHO, 2009).
The cost and breadth of the social security programme in South Africa has grown
substantially since 2005 when the South African Social Security Agency (SASSA)
was established. The evidence points to the social grants. By March 2011, SASSA
reached 14.6 million recipients monthly and became the main contributor to poverty
reduction in South Africa in the post-apartheid era (Van der Berg et al., 2007). The
payment arrangements have become increasingly sophisticated. For instance, SASSA
is in the process of recording bio-informatics of beneficiaries and recipients and smart
cards are being distributed to facilitate non-cash and remote transactions. This
capacity offers substantial opportunity to leverage further support and information
flows to enhance access to education and employment opportunities.
In spite of this, young people in South Africa have extremely limited access to social
security because the system is currently aimed at vulnerable sections of the population
– specifically low-income disabled people (Disability Grant and Grant in Aid), low-
income older people (Old Age Grant [OAG]) and children in low-income families
(Child Support Grant [CSG], and the Care Dependency Grant) as well as the Foster
Child Grant (FCG) (Social Assistance Act No. 13 of 2004). The value of the CSG was
R260 per month in 2011/12, reaching over 10 million children (SASSA, 2011). It has
been demonstrated that the CSG, although small in value, makes a considerable
difference in the lives of people on low incomes (DSD, SASSA & UNICEF, 2012;
Leibbrandt et al., 2010).
Currently there is no social assistance aimed at able-bodied working-age young people
(with the exception of the FCG, which can be extended to 18 to 21 year olds if the
young person is completing secondary education or special education training). The
only type of social assistance available to young people who are not fostered and
pursuing education is the Disability Grant, if they are disabled. In terms of
contributory social insurance, young people in formal employment can access the
Unemployment Insurance Fund if they become unemployed. However, this will only
cover small numbers of young people as most have not had the opportunity to
contribute to the Unemployment Insurance Fund.
There is evidence that many youth are indirectly reached by the OAG, which is aimed at
people aged 60 and over and was set at R1140 in 2011. Bhorat (2004) showed that the
OAG supported 23% of unemployed youth while the Disability Grant and the CSG
supported 6% and 15% of unemployed youth respectively. The likely impact is
greater now, as Bhorat’s study was prepared in the early days of the expansion of the
social grants. These other grants are intended for other individuals in the household
and so will fail to provide adequate income maintenance for the youth in that household.
There is also evidence that the current social assistance provision (for those who are too
young or disabled or old to work) is used by those of working age in various ways,
350    M Altman et al.

including assisting with job seeking activities (e.g. Schöer & Leibbrandt, 2006) and
labour migration (Posel et al., 2006). This diversion of grants towards the unemployed
can create household tensions, however, as it is widely understood that, for example,
child grants are intended for the needs of the children (Ntshongwana et al., 2010;
Surender et al., 2010).
When considering the extension of social assistance, policy-makers are challenged by
concerns about affordability, dependency and perverse incentives (see Spicker, 2006;
ILO, 2008; Surender et al., 2010). This needs to be weighed against the evident need
to implement programmes to alleviate poverty and enhance opportunities for low-
income youth.
There is strong empirical evidence that unemployed and poor people in South Africa
have a very favourable disposition towards work and express a strong willingness to
do so should the opportunity arise (e.g. Noble et al., 2008). The majority (83%) of
poor people interviewed in the 2006 South African Social Attitudes Survey said they
would take a very low paid job if they thought it would improve their position in the
long run. Over three-quarters indicated that they would be prepared to move to find a
job. Labour Force Surveys by StatsSA show that young people search for work for
long periods of time. In 2005, one-quarter of unemployed had been searching for a
job for one to three years while 35% had been looking for three years or more
(Altman, 2010). This speaks to a strong motivation to work. The options below are
paid at such low rates as to render negligible any potential disincentive effects,
although this would have to be tested empirically.
Although some might hold a concern that society would not endorse the extension of the
scope of social assistance provision, this is not necessarily warranted. Using the 2006
South African Social Attitudes Survey data, Surender et al. (2010) found that almost
three-quarters of adults agreed with the statement that ‘people who can’t get work
deserve help in the form of social grants’, and two-thirds of those who defined
themselves as not poor agreed with this statement.

3. Six social security policy options
No single policy or mechanism will resolve the challenges discussed above given the
heterogeneous character of the youth population and the related reasons for inactivity.
Designing social security arrangements for youth is complex. In South Africa, the
scale and cost of any intervention would need to be substantial given the extent of
poverty and unemployment among this age group. Interventions need to be developed
that can achieve widespread poverty alleviation, as well as enable economic
participation to improve lifelong earnings. This is indeed a complex question that
requires an analysis of the creative intersection between social security and social and
economic policies aimed at youth.
Goodin (1988) identifies six possible goals of social policy and highlights that whilst they
might all be regarded as desirable, they may compete with each other in practice. His six
goals are reducing poverty, promoting social equality, promoting social stability,
promoting social integration, promoting economic efficiency, and promoting
autonomy. All of these six goals might be regarded as desirable in relation to policies
for young people and South Africa as a whole. However, in practice, it is a challenge
to design programmes that meet this combination of goals. Moreover, these objectives
Social security for youth amidst high poverty and unemployment    351

can be interpreted in very different ways depending on which ideological discourses
dominate the debate.
The commitment to an expanded provision of social security has been made in the
Constitution, and in the SADC Code on Social Security (SADC, 2007). The National
Youth Policy also calls for social security for young people (SADC, 2007:27). The
idea of the provision of social security to young people is wholly in line with these
key documents, but the type of social security could vary greatly. South Africa and
the SADC region have given careful thought to the question of which types of social
policies the region would seek to promote, and have defined social policies as:
‘[I]nterventions which are about promoting the well-being of all citizens and which
address structural inequalities in wealth, ensure greater equity and equality for all,
correct market shortcomings, reduce poverty and promote social inclusion’ (SADC,
2006). The definition of social policies that has been developed by the SADC
therefore focuses particularly on Goodin’s goals that relate to reducing poverty, and
promoting social equality and social integration.
As well as the policy goals and cost of a programme, the reach of a programme also needs
to be taken into account. Our examples focus on reaching those who exit the CSG at age
18, but – as will be seen – the options reach very different proportions of young people.
Careful consideration needs to be taken as to which groups benefit and miss out from
support.
Six social security policy options are considered in this paper:

 A. unconditional universal grant for 18 to 24 year olds inclusive, at the CSG rate
    (R260);
 B. unconditional means-tested grant for 18 to 24 year olds inclusive, at the CSG rate
    (R260);
 C. unconditional means-tested grant for 18 to 24 year olds inclusive, at the CSG rate
    (R260), plus conditional component with top-up to the OAG rate (R1140) if in
    education/training;
 D. conditional means-tested grant for 18 to 24 year olds inclusive, if in education/
    training, at the OAG rate (R1140);
 E. conditional means-tested grant for 18 to 24 year olds inclusive if unemployed or in
    education/training at the CSG rate (R260); and
 F. opportunities voucher – a one-off allocation of R3500 to recipients of the CSG or
    the FCG, or alternatively R6500 if they complete high school, to be applied to an
    activity that can raise the chances of a school-to-work transition.

In all of these policy scenarios, the current system of grants was assumed to continue as it
was at April 2011, with the exception that the CSG age band was extended from 0 to
14 years to 0 to 17 years, which in practice took place in January 2012 (see SASSA,
2011).
The scenarios focus on 18 to 24 year olds inclusive as the target group (although it is
recognised that older age groups might question the restriction of such support to this
particular age group). These scenarios are not prescriptive but are simply examples
of options that could be considered by the government. The payment amounts for the
six options are also only examples and could be adjusted depending on the
availability of resources and empirical evidence on the cost of meeting basic
needs in the twenty-first century. A further consideration is the level of earnings
352    M Altman et al.

that young people might achieve if in the labour market; a monthly payment at the
level of the CSG would not exceed this, and the higher level of payment to those in
education or training is in recognition that this group is not expected to be
economically active.
As will be noted, the examples represent a range of ideological approaches to the
provision of social security, from universal provision (a social democratic objective)
to a means-tested and conditional grant that represents a more neo-liberal approach.
Also, whilst some of the examples include conditions for ongoing receipt (Options C
to F), some do not (Options A and B). In these instances eligibility is dependent on
ongoing evidence of education/training/work-seeking status, in recognition that the
challenges faced by young people are primarily of a structural nature (e.g. Lund et al.,
2009).

3.1 Option A: Universal grant for 18 to 24 year olds
This option would entail an unconditional non-means-tested grant for all young people
aged 18 to 24 inclusive. Given the extent of youth unemployment, the poor quality of
education that many have received, the lack of available jobs, and the extent of
poverty among young people, this would serve as a direct form of income
maintenance to help to redress these social challenges. The grant could serve as an –
albeit very small – contribution to meeting the material needs of young people (e.g.
contributing to the costs of food, housing, clothing and transport). The rationale for
this option is that categorical benefits are common internationally for groups in
particular need. This option is also consistent with a social democratic or social
citizenship rights-based approach to social security which, it could be argued, is
consistent with the Constitutional commitment to ‘the right to have access to social
security, including, if they are unable to support themselves and their dependants,
appropriate social assistance’ (Republic of South Africa, 1996: section 27.1c). This
option also has the advantage that it would be more straightforward to administer and
thus would be more likely to reach those most in need (Mkandawire, 2005).

3.2 Option B: Means-tested grant for 18 to 24 year olds
This option comprises an unconditional means-tested grant for all young people aged 18
to 24 inclusive. As it would no longer be appropriate to means-test a ‘primary caregiver
and their spouse if they have one’ (as in the case of CSG), the means-test could be
applied to the young person and their spouse if they have one. In terms of
mixed-age-band partners (i.e. if a young person is married to an older person), the
means-test would still apply at the couple level. This grant may have some
unintended consequences but this is unquantifiable and may be a negligible issue (e.g.
people choosing youthful partners as an income stream, or divorcing older partners
and replacing them with youthful partners). Another potential issue is that single
young people living with wealthy parents would also qualify. However, if we were to
apply a means-test to the parents (if present in the household), this may introduce a
perverse incentive whereby people leave home sooner than they would otherwise
have done in order to qualify for the grant, and put themselves at greater risk in so
doing. We therefore apply the means-test to the young person and their spouse if they
have one.
Social security for youth amidst high poverty and unemployment    353

3.3 Option C: Means-tested grant for 18 to 24 year olds plus top-up if in
education or training
This option is a variant of Option B and entails an unconditional means-tested grant made
available to all young people below a certain income threshold. In addition, a substantial
conditional top-up is made available to people in education and training, paid at the rate
of the Disability Grant and the OAG. In consequence, unemployed youth would receive a
lower amount than low-income youth in education or training. Such a grant would
promote participation in education or training.

3.4 Option D: Means-tested grant for 18 to 24 year olds if in education or
training
This option narrows down the focus to youth in education or training only. They are
means-tested in the same way as for Options B and C. In essence, Option D is a
hybrid of the CSG and FCG; like the FCG, it is extended beyond the age of 17 for
those in education, but like the CSG it is means-tested. The option provides no
support for unemployed young people who are not in education or training. It would
penalise low-paid workers who may fall below the means-test yet not qualify because
they are not in education or training. A potential (but again unquantifiable) unintended
consequence might be that people may cease or defer working and enter education or
training in order to qualify, but end up ultimately worse-off if the training is of a poor
quality and does not enhance their employability.

3.5 Option E: Means-tested grant for 18 to 24 year olds who are unemployed or
in education/training
Option E provides a modicum of income support for low-income unemployed youth, as
well as for low-income youth who are in education or training. For this option, the young
person (and their spouse if they have one), are means-tested. The grant is paid at the rate
of the CSG. Unemployed and discouraged unemployed youth are taken into account, as
are those who are in education or training. Other issues to be considered include the fact
that low-paid and/or under-employed workers would be excluded from this option
(although they would not be excluded from Options A, B and C).

3.6 Option F: Opportunities voucher: One-off allocation to recipients of the CSG
or FCG and topped-up if completed high school
Option F is a one-off allocation to beneficiaries of the CSG or FCG. It could, in principle,
be considered alongside each of the other options. For example, a voucher of R3500 could
be committed to the social grant ‘wallet’ or account of a young person if they were
registered for the CSG or FCG, and this amount would rise to R6500 if they completed
high school. A one-off and one-time commitment would be made to beneficiaries at age
16 or at 17 if they were not registered at age 16. The recipient could access the
opportunity between the ages of 16 and 24. At age 24, the voucher would expire. The
resources could only be used for a suite of services that have been assessed as having a
high probability of improving employability, such as a payment to an employer for a
first work opportunity, a post-school training or education opportunity, investment into a
small business, or the cost of books or transport. A voucher of this amount is unlikely
to be enough to catalyse a full year’s employment or the full cost of a post-school
354    M Altman et al.

education opportunity. However, upon entry, some public programme funding could be
channelled in the same way. For example, upon successful education or employment
results, other programmes such as the National Student Financial Aid Scheme bursaries
or the Expanded Public Works Programme (EPWP) non-state-sector employment
incentive might follow.
The opportunities voucher would be aimed at improving access to options available in
a wide variety of programmes and institutions, ranging from further education and
training and higher education and training, to recruitment agencies, to private-sector
recruitment, to EPWP non-state-sector employment incentives. The idea is not to
develop these programmes, but rather to leverage their existence. The opportunities
voucher would simply provide the financial mechanism that enables demand-side
access – where education-seekers or work-seekers can access opportunity directly.
The idea is to enhance the chances of getting a first opportunity, upon which further
opportunities can be stimulated, and is also aimed at incentivising high school
completion.
The mechanics of an opportunities voucher would differ from the social assistance
grants. The programme would depend on the growing sophistication of the social
grant payment services system. This will involve improved bio-informatics of
beneficiaries (the child or youth) and recipients (the guardian), the introduction of
smart cards, the ability to transfer funds, and the registration of vendors for non-cash
transactions. To make an opportunities voucher work, the beneficiaries (the youth)
would have to be registered and be given their own smart cards and accounts.
Different institutions already manage the registration of entities that could qualify. For
example, the Department of Social Development manages the registration of non-
governmental organisations. The South African Revenue Service has tax-compliant
companies. Education institutions, whether public or private, are registered.
Beneficiaries of expanded public works support are monitored by the Department of
Public Works. Other providers, such as transport or educational books, could be
separately registered. It is envisaged that the programme would rely on these
separate registries, and no new registration process would be needed. The SASSA
social grant transaction facility will already enable cash withdrawals at retail stores,
transfers to bank accounts or third parties, third-party payments and the purchase of
goods and services. The opportunities voucher programme would have to identify
which group of entities could qualify, expanding them over time as the programme
grows.
A meaningful monitoring and evaluation service would be required to ensure that funds
are used for the purpose intended, and to assess the impact on youth employability. These
functions could include monitoring whether the beneficiary has completed high school,
monitoring the validity of registered vendors (there would be reliance on existing forms
of registration such as the South African Revenue Service, the non-governmental
organisation registry at the Department of Social Development, South African
Qualification Authority or Skills Education Training Authorities, etc.), and generally
monitoring the impact of the programme.
Such a programme would be well targeted, reaching youth in the poorest households. The
payment structure is designed to encourage young people to complete high school. The
grant would test whether putting resources into the work-seeker or education-seeker’s
hands would reduce the institutional barriers to accessing opportunity. It would test
Social security for youth amidst high poverty and unemployment   355

whether the government should consider partly funding education and training or the
non-state-sector EPWP employment (which pays non-governmental organisations to
hire at an EPWP stipend rate) through this channel.

4. Coverage, cost and impact on poverty of the options
To simulate Options A to E, a South African Microsimulation Model (SAMOD4) was
used (Wilkinson, 2009). Microsimulation modelling is a technique whereby a set of
rules (in this instance, South Africa’s tax and benefit arrangements) are applied to
individuals as captured in a micro-dataset such as a social survey in order to simulate,
at individual level, the impact of the rules on individuals and on aggregate for the
population as a whole (see for example Zaidi et al., 2009; Mitton et al., 2000). The
impact of existing or hypothetical tax and benefit arrangements can then be quantified,
in terms of the extent to which they reduce poverty and inequality, their cost, and
their impact on different groups such as children, workless people and women. In this
instance our focus is on young people. SAMOD Version 1.2 was used, which is
underpinned by the National Income Dynamics Study 2008 dataset (SALDRU, 2008;
Smit, 2010; Wright et al., 2011). SAMOD is a static tax benefit microsimulation
model that enables the next-day financial impact to be measured. It does not take into
account behavioural responses to policy changes.
In our calculations, we applied the tax and benefit rules as they were in 2011. As SAMOD
V1.2 is underpinned by the National Income Dynamics Study 2008 dataset, it was
necessary to recast the survey weights to a 2011 time point, inflate the incomes using
the Consumer Price Index, and update the policies to a 2011 time-point.
Table 1 presents the number of young people that would have been reached in 2011 if
each of the options had been in existence then, as well as the potential cost. As
mentioned above, the only change to the existing tax and benefit rules in 2011 that
were introduced in the simulations for the ‘status quo’ was that the CSG was extended
to all children under the age of 18 with low-income caregivers: by doing so, a further
two million beneficiaries were identified aged 15 to 17 inclusive, with an additional
cost of R6.46 billion. As can be seen in Table 1, these additional CSG beneficiaries
are included for each of Options A to E.
Option A would reach all 18 to 24 year olds, almost seven million young people, at a cost
of R21.8 billion annually if paid at the same rate as the CSG. A means-tested grant for
young people aged 18 to 24 (Option B) would reach 5.9 million young people aged 18 to
24 inclusive, and would cost R18.4 billion if paid at the same rate as the CSG. Option C
would also reach 5.9 million young people, but the top up (to the payment level of the
OAG/Disability Grant) for those in education and training would mean that the cost
was virtually the same as for Option A.
Option D, offering a means-tested grant for 18 to 24 year olds in education and training,
and paid at the level of the OAG/Disability Grant reaches only 339 000 people aged 18 to
24, at a cost of R4.6 billion. This is based on reported numbers of people in the National
4
  SAMOD (The University of Oxford, The Department of Social Development of the Government
of the Republic of South Africa and The University of Essex 2008) was developed using the
EUROMOD framework. EUROMOD is a tax-benefit model for the European Union, supported
by European Commission funding, developed by a large consortium of European researchers
and coordinated by Holly Sutherland at the University of Essex.
356      M Altman et al.

Table 1: Number of eligible young people and cost of provision
                                                   Number of eligible young          Cost of provision per
Option                   Age group                      people (million)                year (R million)

Status quo                 15 to 17                           2.071                            6 461.33
                           18 to 24                           0                                    0
                        15 to 24 (all)                        2.071                            6 461.33
A                          15 to 17                           2.071                            6 461.33
                           18 to 24                           6.986                           21 796.05
                        15 to 24 (all)                        9.057                           28 257.38
B                          15 to 17                           2.071                            6 461.33
                           18 to 24                           5.882                           18 353.19
                        15 to 24 (all)                        7.953                           24 814.52
C                          15 to 17                           2.071                            6 461.33
                           18 to 24                           5.882                           21 937.75
                        15 to 24 (all)                        7.953                           28 399.08
D                          15 to 17                           2.071                            6 461.33
                           18 to 24                           0.339                            4 643.64
                        15 to 24 (all)                        2.410                           11 104.96
E                          15 to 17                           2.071                            6 461.33
                           18 to 24                           1.984                            6 190.29
                        15 to 24 (all)                        4.055                           12 651.61
F                16 to 18, used up to age 24                  2.071                            1 582.06

Notes: This table does not include administrative costs. Figures are based on 100% take-up.

Income Dynamics Study in this age group in education or training. However, the
numbers studying might expand if such a grant was introduced.
Option E, paid only at the level of the CSG, is a means tested grant for 18 to 24 year olds
who are unemployed or in education/training. This option would reach just under two
million young people and would cost R6.2 billion.
Option F works differently to the others and was not simulated using SAMOD. A liability
is generated that the grant beneficiary could access for specified purposes and through
registered vendors. This would take place upon leaving school. It is recognised that
many (46%) young people leave school without completing high school. This mostly
takes place from Grade 10, and especially Grades 11 and 12. Ten per cent of 16 year
olds are out of school, as are 17% of 17 year olds and 31% of 18 year olds. About
59% of the cohort makes it to their final year of high school, and of these about 67%
pass (Sheppard, 2009). We estimate that a commitment of R1.58 billion would be
needed each year for Option F. This is based on an assumption that not all school-
leavers and high school graduates will take up the opportunity, where 25% of 16-year-
old school-leavers do, ramping up to 70% of high school graduates. While the grant is
accessible upon leaving school, most likely taking place between the ages of 16 and
19, it is envisaged that beneficiaries would use the grant between the time of school
leaving and the age of 24. This window is suggested to raise the chances of using the
grant, in a context that is recognised to have many institutional barriers and a slow-
growing economy. It is envisaged that up to 550 000 beneficiaries across different age
Social security for youth amidst high poverty and unemployment    357

groups would be eligible to access their opportunities voucher in any one year, but that an
average of 270 000 would activate it annually, and a large proportion would be those in
the older group who had completed Grade 11 or more.
Options A to E are focused on immediate poverty alleviation, with some of the scenarios
offering top-ups to those in education. There is some evidence that, for those in deep
poverty, immediate poverty alleviation can contribute to improved education and
labour market participation in the longer term. The top-up for education is meant to
be encouragement of human capital attainment that will affect longer term poverty
reduction. Option F is focused on improving lifelong earnings, but is only a one-off
payment and so can be considered in conjunction with any of the other options.
The remainder of this section considers the extent to which Options A to E raise young
people above the poverty line. In order to estimate poverty, household income was
calculated and then divided by the number of people in the household to give a per-
capita income. The poverty lines used for the analysis are the lower-bound poverty
line proposed by Hoogeveen & Özler (2006) (i.e. R322 per capita per month in 2000
prices), which is R604 per capita per month in 2011 prices, and the upper-bound
poverty line (i.e. R593 per capita per month in 2000 prices), which is R1113 per
capita per month in 2011 prices.
Poverty estimates are presented for these lower-bound and upper-bound poverty lines for 15
to 17 year olds, 18 to 24 year olds, and for a combined group of 15 to 24 year olds (Table 2
and Table 3 respectively) and for the total population (Table 4 and Table 5 respectively).
Results are shown for the impact of the ‘status quo’ and Options A to E on poverty head
counts, the depth of poverty and the severity of poverty. The poverty head count refers
to the proportion of people in the age group that fall below the upper-bound or lower-
bound poverty line. The poverty depth measure (P1) shows how far people are from the
poverty line. The poverty severity measure (P2) places greater emphasis on people that
are further away from the poverty line (Foster et al., 1984; World Bank, 2013).
If a choice was to be made simply on the basis of impact on poverty experienced by those
aged 18 to 24, Option C is the most effective; that is, the means-tested grant for young
people paid at the rate of the CSG, plus a top up to the Disability Grant and OAG rate
if in education/training – using the lower-bound poverty line, poverty for those aged 18
to 24 falls from 54.1% to 47.6%. Using the upper-bound poverty line, poverty for this
group falls from 67.5% to 66.0%. In some respects this small percentage point change
may seem disappointing, but this is because the poverty levels of this severely deprived
group of the population and the households in which they live are such that it would
require more than a grant at the CSG rate (for those not in education/training) to make a
dramatic difference to their position in relation to these poverty lines. The cost of
Option C would be substantial, at an estimated R21.9 billion per annum, reaching
5.8 million people aged between 18 and 24. It would, however, serve to reduce the
financial burden placed on other (mainly poor) household members by unemployed
young people.
Option C has some attractions as it provides an admittedly small amount of income
support to all low-income young people, but provides additional support for those in
education/training. The grant therefore financially incentivises young people to
participate in education/training. People entering low-paid work or working for a
small number of hours per week would continue to be eligible for the CSG-level
358
Table 2: Poverty rates for status quo and Options A to E by age group using the lower-bound poverty line, 2011
                             Poverty headcount (P0)                          Poverty depth (P1)                               Poverty severity (P2)

                                                                                                                                                                   M Altman et al.
Option            15 to 17         18 to 24      15 to 24 (all)   15 to 17      18 to 24          15 to 24 (all)   15 to 17       18 to 24        15 to 24 (all)

Status quo          0.573           0.541             0.551        0.291         0.315                0.308         0.184          0.232              0.218
A                   0.554           0.487             0.507        0.260         0.233                0.241         0.153          0.135              0.141
B                   0.555           0.489             0.508        0.260         0.233                0.241         0.153          0.136              0.141
C                   0.548           0.476             0.497        0.253         0.224                0.233         0.148          0.129              0.135
D                   0.566           0.523             0.536        0.281         0.300                0.295         0.176          0.219              0.206
E                   0.566           0.524             0.537        0.280         0.288                0.285         0.173          0.198              0.191

Note: Figures are based on 100% take-up.

Table 3: Poverty rates for status quo and Options A to E by age group using the upper-bound poverty line, 2011
                             Poverty headcount (P0)                          Poverty depth (P1)                               Poverty severity (P2)

Options           15 to 17         18 to 24      15 to 24 (all)   15 to 17     18 to 24           15 to 24 (all)   15 to 17       18 to 24        15 to 24 (all)

Status quo         0.744            0.675             0.695        0.467         0.455                0.459         0.334          0.350              0.345
A                  0.738            0.661             0.684        0.446         0.397                0.411         0.308          0.273              0.283
B                  0.738            0.665             0.687        0.447         0.399                0.413         0.308          0.275              0.285
C                  0.738            0.660             0.683        0.442         0.389                0.405         0.302          0.265              0.276
D                  0.744            0.671             0.693        0.461         0.442                0.447         0.326          0.336              0.333
E                  0.744            0.671             0.693        0.460         0.436                0.443         0.325          0.324              0.324

Note: Figures are based on 100% take-up.
Social security for youth amidst high poverty and unemployment    359

amount but would cease to be eligible if their income, and that of their spouse if they
have one, exceeds the threshold.
If the choice was to be made simply on the basis of affordability, the most affordable
option would of course be to do nothing. The least expensive of the options
considered is Option F, at R1.58 billion per year, although this would naturally
depend on how it is designed and, as a one-off payment, would not provide a regular
source of income maintenance. The most expensive option is Option C, at R21.9
billion. Notably, this is only slightly higher than Option A (R21.8 billion), which is
the universal grant paid to all young people and would presumably be more
straightforward and less costly to implement as there would be no means-test or
variable rate of payment. Options D and E, costing R4.6 billion and R6.2 billion
respectively, are much less expensive and have an almost identical impact on poverty.
However, the reach of the options is quite different, with Option D targeting less than
5% of young people and Option E targeting 28%.
Options C, D and E are the options most focused on linking youth into education and
employment. Options C and D would offer a monthly grant at the OAG rate to those
in education and training, the component of which could reach 339 000 young people
at a potential cost of R4.6 billion annually. The aim would be to encourage and
support youth to obtain further education. It could have a substantial poverty
reduction impact for this group, as well as improving employability. However, Option
D reaches a small group relative to the whole.
Option F is a different sort of proposal – an opportunities voucher. If the vendor
provided education services to the young person, there may be limited impact on
immediate poverty (depending on how it is designed) and an – admittedly
unquantifiable – impact on lifelong earnings. If the vendor was an employer, the
impact would be immediate poverty alleviation – through earnings – as well as
improving longer term employment prospects. The funds would enable a young
person to get a leg through the door of the school-to-work transition, whereupon
further resources would be needed. It would test the impact of a demand-side
incentive that cuts out much of the red tape and institutional barriers to accessing
opportunities. This option leverages the system of social grants to access labour
market and education opportunities. Moreover, it takes advantage of the benefits of
the system, including effective targeting of vulnerable groups, prior beneficiary
identification, and an increasingly sophisticated financial system that enables
payments directly to accredited providers.

5. Concluding remarks
More meaningful solutions are needed to address the extent of youth poverty and
unemployment in South Africa. Significant efforts are required across a range of
sectors, including the income maintenance arena as well as in relation to education
and economic policy.
This article explores six options in relation to social security policy and presents findings
on their possible reach, cost and impact on poverty. In practice, the options are limitless.
Once one or more options are under consideration, more detailed analysis of their
mechanics, costs and underpinning objectives – and intersection with other
government initiatives for young people – would be required, in addition to efforts to
360       M Altman et al.

Table 4: Poverty rates for total population status quo and Options A to E using the
lower-bound poverty line, 2011
Option             Poverty headcount (P0)       Poverty depth (P1)        Poverty severity (P2)

Status quo                   0.487                    0.263                       0.181
A                            0.466                    0.233                       0.149
B                            0.466                    0.233                       0.149
C                            0.462                    0.229                       0.146
D                            0.482                    0.257                       0.176
E                            0.481                    0.253                       0.169

Note: Figures are based on 100% take-up.

Table 5: Poverty rates for total population for status quo and Options A to E using
the upper-bound poverty line, 2011
Options            Poverty headcount (P0)       Poverty depth (P1)        Poverty severity (P2)

Status quo                   0.629                    0.403                       0.298
A                            0.624                    0.382                       0.271
B                            0.625                    0.383                       0.272
C                            0.624                    0.379                       0.268
D                            0.628                    0.399                       0.293
E                            0.628                    0.396                       0.289

Note: Figures are based on 100% take-up.

estimate behavioural responses to such policy changes, which is not addressed in this
paper. Prior to the introduction of the CSG, the Lund Committee was established in
order to carefully review policy options (Lund, 2008). Given that the provision of
social security for young people would represent a significant shift towards the goal of
comprehensive social security, it is recommended that a process similar to the Lund
Committee be established in relation to the provision of income maintenance for
young people.

Acknowledgements
The authors gratefully acknowledge the support of the South African Department of
Social Development. The results in this paper do not necessarily represent the views
of the Department.

References
Altman, M, 2010. Youth labour market challenges in South Africa. In Boninelli, I & Meyer, T
    (Eds.), Human capital trends. KnowRes Publishers, Johannesburg, 22–43.
Altman, M, 2013. The challenge of employment creation in South Africa. In Pillay, U, Hagg, G &
    Nyamnjoh, F (Eds.), State of the Nation: South Africa 2012– 13. HSRC Press, Cape Town,
    185 –221.
Bhorat, J, 2004. Youth and Social Security in Post-apartheid South Africa. Development Policy
    Research Unit, University of Cape Town.
Social security for youth amidst high poverty and unemployment          361

DSD (Department of Social Development), 2010. Progress Review of the Implementation of the
     White Paper on Population Policy for South Africa (1998) and the ICPD Programme of
     Action (1994). Department of Social Development, Pretoria.
DSD, SASSA & UNICEF (Department of Social Development, South African Social Security
     Agency & UNICEF), 2012. The South African Child Support Grant Impact Assessment:
     Evidence from a Survey of Children, Adolescents and their Households. UNICEF South
     Africa, Pretoria.
Foster, J, Greer, J & Thorbecke, E, 1984. A class of decomposable poverty measures.
     Econometrica 52(3), 761– 6.
Goodin, RE, 1988. Reasons for Welfare: The Political Theory of the Welfare State. Princeton
     University Press, Princeton, NJ.
Gribble, J & Bremner, J, 2012. The challenge of attaining the demographic dividend. Population
     Reference Bureau Policy Brief. www.prb.org/pdf12/demographic-dividend.pdf Accessed 23
     April 2013.
Hall, K & Wright, G, 2010. A profile of children living in South Africa in 2008. Studies in
     Economics and Econometrics 34(3), 45–68.
Hoogeveen, J & Özler, B, 2006. Poverty and inequality in post-apartheid South Africa: 1995–
     2000. In Bhorat, H & Kanbur, R (Eds.), Poverty and Policy in Post-apartheid South Africa.
     HSRC Press, Cape Town, 59 –94.
ILO (International Labour Office), 2008. Can low-income countries afford basic social security?
     Social Security Policy Briefings Paper No. 2, Social Security Department, International
     Labour Organization, Geneva.
ILO & WHO (International Labour Organization & World Health Organization), 2009. The social
     protection floor: A joint crisis initiative of the UN chief executives board for co-ordination on
     the social protection floor. www.un.org/en/ga/second/64/socialprotection.pdf Accessed 23
     April 2012.
Leibbrandt, M, Woolard, I, Finn, A & Argent, J, 2010. Trends in South African income
     distribution and poverty since the fall of apartheid. OECD Social, Employment and
     Migration Working Paper No. 101, OECD Directorate for Employment, Labour and
     Social Affairs, Paris.
Letseka, M, Cosser, M, Breier, M & Visser, M, 2010. Student Retention and Graduate Destination:
     Higher Education and Labour Market Access and Success. HSRC Press, Cape Town.
Lund, F, 2008. Changing Social Policy: The child Support Grant in South Africa. HSRC Press,
     Cape Town.
Lund, F, Noble, M, Barnes, H & Wright, G, 2009. Is there a rationale for conditional cash transfers
     for children in South Africa?. Transformation 70, 70– 91.
Mitton, L, Sutherland, H & Weeks, M (Eds.), 2000. Microsimulation Modelling for Policy
     Analysis. Cambridge University Press, Cambridge.
Mkandawire, T, 2005. Targeting and universalism in poverty reduction. Social Policy and
     Development Programme Paper No. 23, United Nations Research Institute for Social
     Development, Geneva.
National Treasury, 2011. Confronting youth unemployment: Policy options for South Africa:
     Discussion paper. www.treasury.gov.za/.../Confronting%20youth%20unemployment%20-%
     20Policy%20options.pdf Accessed 28 September 2011.
Noble, M, Ntshongwana, P & Surender, R, 2008. Attitudes to Work and Social Security. HSRC
     Press, Cape Town.
Ntshongwana, P, Wright, G & Noble, M, 2010. Supporting Lone Mothers in South Africa: Towards
     Comprehensive Social Security. Department of Social Development, Pretoria.
Posel, D, Fairburn, J & Lund, F, 2006. Labour migration and households: A reconsideration of the
     effects of the social pension on labour supply in South Africa. Economic Modelling 23(5),
     836 –53.
Republic of South Africa, 1996. The Constitution of the Republic of South Africa, Section 1 of
     1996. Government Printer, Pretoria.
362     M Altman et al.

SASSA (South African Social Security Agency), 2011. You and your grants 2011/12. http://www.
     sassa.gov.za/Portals/1/Documents/d54e383b-7e3d-4c96-8aa2-4cc7d32bc78f.pdf Accessed
     24 April 2013.
Schöer, V & Leibbrandt, M, 2006. Determinants of job search strategies: Evidence from the
     Khayelitsha/Mitchell’s Plain Survey. Centre for Social Science Research Working Paper
     167, University of Cape Town, Cape Town.
Sheppard, C, 2009. The State of Youth of in South Africa: Trends in Education Attainment. HSRC,
     Centre for Poverty Employment and Growth, Pretoria.
Smit, EvdM (Ed.), 2010. Special edition on the South African National Income Dynamics Study.
     Studies in Economics and Econometrics 34(3).
SALDRU (Southern Africa Labour and Development Research Unit), 2008. NIDS (National
     Income Dynamics Study), 2008, Wave 1 [dataset]. Southern Africa Labour and
     Development Research Unit [producer], Cape Town. DataFirst [distributor], Cape Town.
SADC (Southern African Development Community), 2006. Towards an African regional social
     policy: Johannesburg draft. Endorsed at the SADC Ministerial Meeting, 2nd Forum of
     SADC Ministers Responsible for Social Development, 24 November, Johannesburg.
SADC (Southern African Development Community), 2007. Code on Social Security in the SADC.
     SADC, Gaborone, Botswana.
Spicker, P, 2006. Understanding incentives. In Report on Incentive Structures of Social Assistance
     in South Africa. Department of Social Development, Republic of South Africa, Pretoria.
StatsSA (Statistic South Africa), 2010. Quarterly Labour Force Survey, Quarter 4. Statistics South
     Africa, Pretoria.
Surender, R, Noble, M, Wright, G & Ntshongwana, P, 2010. Social assistance and dependency in
     South Africa: An analysis of attitudes to paid work and social grants. Journal of Social Policy
     39, 203 –21.
Van der Berg S, Louw, M & Du Toit, L, 2007. Poverty trends since the transition: What we know.
     Monograph, University of Stellenbosch.
Wilkinson, K, 2009. Adapting EUROMOD for use in a developing country – The case of South
     Africa and SAMOD. EUROMOD Working Paper No. EM5/09, University of Essex,
     Colchester, UK.
World Bank, 2013. Choosing and estimating poverty indicators. http://web.worldbank.org/
     WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20242881is
     CURL:YmenuPK:492130pagePK:148956piPK:216618theSitePK:430367,00.html
     Accessed 3 May 2013.
Wright, G, Noble, M, Dinbabo, M, Ntshongwana, P, Wilkinson, K & Le Roux, P, 2011. Using the
     National Income Dynamics Study as the base micro-dataset for a tax and transfer South
     African Microsimulation Model. Report produced for the Office of the Presidency, South
     Africa.
Zaidi, A, Harding, A & Williamson, P (Eds.), 2009. New Frontiers in Microsimulation Modelling.
     Ashgate, Vienna.
Copyright of Development Southern Africa is the property of Routledge and its content may
not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's
express written permission. However, users may print, download, or email articles for
individual use.
You can also read