How four months wiped out 10 years of jobs growth – and matched a decade of growth in SA’s social security net
Vladimir Lenin is famously quoted as saying that “There are decades where nothing happens and weeks where decades happen.”
Looking back on the last few months it is clear now that a decade’s worth of change has happened in the space of just four months. In an ironically symmetrical fashion we seem to have lost a decade’s worth of jobs in less than half a year, and expanded the grant system by the equivalent of a decade over the same period. Between 2009 and 2019 the country managed to create 2,4-million jobs, while early indications are that in the last four months we may have lost as many as 2,8-million jobs. Over that same decade the number of grant recipients grew from 14-million to 18-million as more people were brought into the grant system. If the 4-million recipients of the new COVID-19 Social Relief of Distress Grant (SRD) of R350 per month keep their grants beyond October then we will have achieved a decade’s worth of expansion (an additional 4-million grant recipients) in the space of 4-months.
As we think about the future, the key uncertainties are beginning to coalesce around three important questions, the answers to which will determine what South Africa looks like in the decade to come: (1) Who gets jobs? (2) Who gets grants? (3) What happens to growth?
If there is one thing that all South Africans agree on, it is that more jobs are a good thing. Across the political spectrum everyone realises that jobs are preferable to grants and typically come as a package deal with economic growth, which again most people think is a good thing. On the topic of economic growth we already know the situation is dire; the Statistician General announced that the economy shrunk by 16% in the second quarter of 2020 compared to 2019 and if that trend continues for the next three quarters then the economy will have essentially shrunk by 51% (the annualised figure much touted in the media). Put differently, if this short-term drop in production and consumption is sustained for a full year, our GDP will be half of what it was pre-COVID. Such a decline is unprecedented outside of civil-wars and coups. But what about jobs?
Three months ago we released the results of the first wave of our National Income Dynamics Study Coronavirus Rapid Mobile Survey (Nids-Cram). This is a nationally-representative telephonic survey of over 7000 South Africans asking them about their employment, income, hunger, grant receipt, and a host of demographic background questions. Using over 50 call-center agents and conducting 20-minute interviews with each participant we were able to collect vital information on how they were faring. Because they were sampled from an existing survey that was broadly nationally representative we can extrapolate our findings to the country at large.
Wave 1 showed that about 2,8-million South Africans lost their jobs between February and April 2020 and a further 1,4-million were furloughed (that is, they did not work and earned no income, but thought they had a job to return to). We have now conducted our second wave of the survey by re-interviewing the same individuals two months later and asking them if any of these key outcomes have changed between April and June. We received 5,700 responses (81% response rate) which we can use to calculate the change in jobs from Level 5 lockdown (April) to Level 3 lockdown (June). We are also in the fortunate position of having the imminent release of StatsSA’s Quarterly Labour Force Survey (QLFS Q2) which uses a much larger sample and will also estimate changes in the labour market from Q1 to Q2.
It is difficult to describe the situation emerging from the data as anything other than a jobs bloodbath. Of those 2,8-million job losses between February and April, essentially none have returned by the end of June. The number of those not employed in April is the same as the number not employed in June. While that may change under Level 1 lockdown (and we will be able to track this in Wave 3) – the fact that we see practically no change whatsoever is extremely worrying. Some of the good news emerging from Wave 2 was that among the 1,4-million additional furloughed workers, 750,000 (54%) were re-employed and earning an income in June. Less positively 550,000 (39%) became unemployed and 100,000 (7%) are still furloughed, with the number of furloughed workers now the same as it was pre-COVID. The fact that only half of those who thought they had a job to return to actually did does not bode well for the ‘bounceback’ hypothesis where jobs that were lost return quickly.
Figure 1: Employment status in February, April and June 2020 (millions) – NIDS-CRAM Wave 1 and 2 (Source: Jain et al. 2020)
To put some of these numbers in perspective, earlier this year the Statistician General Risenga Maluleke reported that over the last decade the South African economy had created 2,4-million additional jobs (from 2009 to 2019). If the job losses we see in NIDS-CRAM are accurate and long-lasting then we will have lost the equivalent of 10 years’ worth of job growth in the space of four months.
This paints the national picture overall and shows a 16% decline in net employment between February and June 2020. But as with everything in South Africa, the average is uniquely misleading. Ronak Jain and her co-authors show that employment losses for manual labourers were twice as high (-30%) as the national average, while those for the tertiary educated were half as much (-8%) as the national average. Between February and June 2020 the poor were ten times more likely to lose their jobs (-31%) compared to the rich (-3%).
Figure 2 Percentage net loss in employment between February and June 2020 by sub group (Source: Jain et al., 2020, using NIDS-CRAM Wave 1 and 2 data)
So much of these results were predictable given the way that the lockdown happened and the way that the South African labour-market works. It is a misnomer to think that the distinction is only between the ‘employed’ and the ‘not employed’, as critical as that distinction might be. There is an important sub-category of the employed, who we might call the ‘precariat’ – those without formal contracts, without qualifications and without in-demand skills. To that list we should now also add ‘ability to work from home’ since that also seems to have been critical to retaining employment during lockdown. Vimal Ranchhod and Reza Daniels show that only 24% of South Africans said they were able to work from home ‘Sometimes’ or ‘Mostly’ in June, with job losses tracking ability to work from home quite closely. The highest rates of reported ability to work from home were seen among White respondents (79%), and those with post-matric qualifications (40%) with the lowest rates for Black Africans (16%), those with matric or less (15%) and those living in Farms and Traditional areas (11-19%). If one looks at June levels of employment for these groups it is highest for White respondents (79%) and those with post-matric qualifications (65%) and lowest for Black Africans (45%) and those living in Traditional areas (38%).
It would be incorrect to jump on ‘ability to work from home’ as if that were the deciding factor – it isn’t. Each of these iterations – race, qualifications, occupation, employment protection etc. – is simply singing the same song in a different key, a common story but from a different angle. That story is one of two South Africa’s – a center and a periphery. That has always been the case in South Africa, the scary thing is that this already small ‘center’ is now contracting and the already large periphery is now expanding.
Let us now turn to the three questions that will dictate what South Africa looks like in the decade to come: (1) Who gets jobs? (2) Who gets grants? (3) What happens to growth?
Who gets jobs?
The first of these is about the labor market: In six months time will we see a ‘bounce-back’ to some previous level of employment, even if quite a bit lower? Or will there be a further intensification of the two-South Africa’s we have always had – a shrinking center and a widening periphery. If so that would amount to a fundamental restructuring of who has jobs and who doesn’t. Given the sheer scale of job-losses to date, and the fact that there is no evidence of any bounceback between April and June, it looks increasingly likely that we’re stuck with the second option. Businesses are choosing not to rehire those they retrenched. In this time of uncertainty it would seem business owners are both pessimistic about the country’s future and also unwilling or unable to absorb the costs of re-employing those they retrenched. A cynical view is that businesses are using this crisis as an opportunity to further pivot away from labour which they see as costly, risky and possibly unnecessary. If that is the case then COVID-19 and the lockdown will have not only revealed our inequalities like never before, but actually made them far worse, accelerating a disjuncture that has been long in the making.
Who gets grants?
The second question of who gets grants is about social welfare and the introduction of a new type of grant bringing previously uncovered individuals into the system, the COVID-19 Social Relief of Distress (SRD) grant of R350 per month. This is available for those with no other income and no other grant. Although this was introduced as a temporary relief mechanism, there are currently serious discussions about extending this grant (and the top-ups to the other grants) beyond the end of October when they were originally meant to expire. One of the success stories of the COVID-19 period in our country is that the government has successfully created a new grant distribution system incorporating vulnerable and uncovered South Africans and doing so in a way that is both pro-poor and relatively effective. Between April and June we see rates of weekly hunger declining by 27% for both adults and children, almost certainly driven in part by the roll out of the new grants and the top-ups of the old ones.
Given that millions of South Africans are currently left destitute without work and relying solely on these grants for their livelihoods, it is difficult to imagine a world where they are not extended at least until the end of the year if not later. Yet that introduces new complexities since what was introduced as temporary can very quickly become permanent. Put differently, the longer that door stays open, the harder it will be to shut. Treasury officials are acutely aware of this.
In a weirdly similar fashion to the labor market, what we are seeing with grants is simply the rapid acceleration of the pre-COVID trend, which was the steady expansion of social welfare to cover more people over time. In their paper on social grants Tim Kohler and Haroon Bhorat show that the number of grant recipients in the country increased by about 4-million people between 2009 and 2019 (from 14-million to 18-million recipients). What took 10 years has now been re-accomplished in 4 months: the weighted results from Nids-Cram Wave 2 shows that by July/August 4,3-million additional people had received the COVID-19 SRD grant. (SASSA administrative data report an almost identical number of recipients; 4,4-million).
The one key difference between the pre- and post-COVID trend is the inclusion of young unemployed men. Previously government grants were only allocated to those who could not work or somehow needed the State to act as a ‘provider’; the elderly (Old Age Pension, R1860/mo), women with children (Child Support Grant, R440/mo) and those with disabilities (Disability Grant, R1860/mo) together with a few others. Yet COVID-19 has pushed us into the realm long predicted as the end point of ‘grant-logic.’ That logic says that whether or not government’s can create jobs, they have a moral responsibility to prevent destitution at all costs. The right to some minimum amount of food or income is bound up in an understanding that all people have worth and their basic dignity must be protected, irrespective of the cost or the consequences. Grant-logic also recognises that deferring this responsibility to some future point when jobs can be found is both unacceptable and disingenuous. Johnny Steinberg made this point most eloquently in 2013 calling a spade a spade:
“If we are honest with ourselves, we have long ago given up trying to employ everyone, or even to halve unemployment…South Africa started bleeding jobs in the mid-1970’s, along with much of the rest of the world. We have been bleeding jobs ever since…It hasn’t mattered who has been in power or whether our political system has been a racial dictatorship or a democracy, or whether our labor law has been rigid or flexible – we cannot employ everybody. We can’t even come close. To think that we can is to indulge in millenarian thinking, as if Jesus will come and remake the world, as if there is a thing called magic. Deep down, we know this. For while we talk about creating jobs, we have been doing something else – we have been handing out grants. Some say that it is a stopgap measure, just to tide us over until jobs are found. Others say that it is creating a culture of idleness from which there will be no return. But if we are honest, it is what we do now and what we will keep doing forever. It is a substitute for work and it holds the country together; it has saved millions from starvation and misery. If we accept that welfare is permanent, we must go the whole hog; we must start giving grants to the one category of poor people entirely excluded from them – young men.”
That is exactly where we are today and now that the genie is out the bottle it will probably be political suicide to try and put it back inside. Every month that grants are paid to those who previously did not receive them (or, as we will see, any income whatsoever) further solidifies new relationships and expectations between those citizens and the State. Every month that someone does not go hungry because they receive R350 from the government, is another month they move towards being single-issue voters: ‘Kkeep the grants’. By its very eligibility criteria, the Covid-19 grant excludes anyone who receives any other kind of government grant. Thus, in almost all cases they are ‘first time grant recipients.’ It turns out that about 40% are probably also ‘first time income recipients’ in the sense that they are not only not employed, but have never been employed before. That is only possible to ascertain using a panel survey like Nids-Cram that has followed the same people over time.
What our data shows is that of the 4,3-million Covid-19 grant recipients, about half (2,2-million) were not employed at any time in 2020, neither in June, April or even in February before the crisis. In fact about 40% of recipients (1,7-million) were not only not employed in 2020, but also not employed in 2017 when last they were surveyed in Nids-2017. For the first time, potentially in their lives, they have access to a very modest income source that is theirs. It is exceedingly unlikely they will give this up without a fight. The conceptual shift gaining ground every day, is not only that a new grant is here, but that a new grant should be here. The semantic shift from ‘Covid-relief’ to ‘Unemployment-relief’ might not sound like much, but it will become politically consequential as we approach elections.
The ANC is fast approaching a double-bind: remove the grants and face the anger of your voter base, or keep the grants and find the money from new debt, new taxes or tackling corruption. Any of those options will anger an important ANC constituency: the ratings agencies, the tax-base or corrupt politicians.
(3) What happens to growth?
Economic growth is important for both of the two preceding questions – it heavily influences how many new jobs get created, as well as how much tax revenue is raised and can then be redistributed as grants. What we know so far is that the lockdown and the pandemic have been disastrous for economic growth. The International Monetary Fund (IMF), the South African Reserve Bank (SARB) and the National Treasury all estimate that the economy will shrink by about 7,3% in 2020. This is the equivalent of having the 2009 recession four times in one year. (The SA economy shrunk by 1.8% in 2009 following the Financial Crisis, according to Treasury). The President seems to be aware of this and all indications are that we will not lockdown again in the coming months, irrespective of a second wave of infections and irrespective of the death-toll. The collateral damage is simply too large. Yes, people might not be dying of COVID-19, but they are losing practically everything else that they value.
We know that children have lost 40% of the academic year, and some estimates are that we will only get back to our pre-pandemic learning trend in 2031 depending on how much catch-up there is in the years to come. Mental health across the country has deteriorated significantly with twice as many people screening positive for depressive symptoms in June 2020 (24%) compared to 2017 (12%). Those that experienced hunger ‘Almost every day or every day’ were twice as likely (44%) to screen positive.
One of the unhelpful developments during the pandemic has been the false dichotomy between ‘saving lives’ and everything else. This often manifests as statements like “saving lives is more important than saving jobs’ or ‘saving lives is more important than saving the academic year.’ Discovery Health estimates that the lockdown might have saved 16,000 lives in 2020, yet at what cost? When are we allowed to have the conversation about whether the costs that were incurred were justified to save this number of lives? To even bring it up risks accusations of being callous and insensitive.
Of course hindsight is 20:20 and no one knew whether the death toll would be ten times higher than it was. We didn’t know if HIV and TB would increase COVID-19 death rates or introduce some other complications. There were so many unknowns and policymakers were placed in the most difficult situations of their lives. Yet, now we do know and we have for some time. Is this not just water under the bridge? What good is it now to assess whether the lockdown was fit for purpose, accomplished its goal or was the right length? The answer is twofold: (1) Unless there is an adequate recognition of the devastation caused by the lockdown, it’s possible that it will again be seen as a viable policy tool to limit infections. It shouldn’t be. It is the ‘nuclear’ option and should be avoided at all costs. And (2) It’s a mistake to think that the lockdown is over – it is still with us in innumerable ways – both in bureaucratic operating procedures (like occupancy rates in stores and queues), and psychologically as many people are still terrified of this virus. What most people don’t realise is that about 450,000 South Africans die every year of something (illness, old age, car accidents etc). About 14,000 people in South Africa die every year from road accidents. At the time of writing 16,000 people have tragically died of COVID-19 in South Africa with projections indicating it will be less than 20,000 for the whole year. A big part of that is that, for whatever reason, South Africa’s COVID-19 mortality rate is much lower than in Europe or America, even if excess deaths are allocated to COVID-19. This is not to trivialize the coronavirus or the deaths that it has caused. It is only meant to place these deaths in perspective with the aim of having an evidence-based plan on the best policy responses to the social and economic crises that are now on our doorstep.
So where to from here? Firstly, the lockdown was meant to buy time to prepare the healthcare system, not to prevent infections or deaths. Given the extraordinary collateral damage it should be ended immediately – in all its forms – and not reinstated in the future. Secondly, the grant top-ups and the new COVID-19 grant should be extended for a further six months to prevent hunger and destitution and maintain political stability. In all likelihood this will make them a permanent feature of South African society, and that will not be a bad thing. With millions of job losses and a fragile economy with no indication of a bounceback, more than ever South Africa needs the glue that holds it together. That glue is the grant system and while it may seem costly it seems less so when one considers the alternatives. It is also the right thing to do.
Nic Spaull is the Principal Investigator of NIDS-CRAM and all NIDS-CRAM papers are all available for download at: https://cramsurvey.org/reports/ and the Wave 1 and 2 data are available from DataFirst.
This article originally appeared in the Financial Mail on 30 September 2020.