The R350 grant, which gave people without jobs a safety net during the pandemic, may have been the ticket to stopping South Africa’s labour market from flatlining. This is according to new research, which gives impetus to calls for the introduction of a basic income grant as the country endures a spiralling unemployment crisis.
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A recently released report, by the University of Cape Town’s Development Policy Research Unit (DPRU), shows that the Covid-19 grant — which came to an end two months ago — has played an important role in reducing labour market inactivity.
The likelihood of Covid-19 grant recipients searching for a job was 25 percentage points higher than among those who did not, the research suggests.
Researchers used Statistics South Africa’s quarterly labour force survey as well as data from the National Income Dynamics Coronavirus Rapid Mobile Survey to determine the grant’s causal effect on the country’s labour market.
The report’s findings, researchers note, contradict the common concern that social grants discourage people from seeking work.
Covid-19 sent South Africa’s unemployment crisis off the deep end. In the first months of the first lockdown at the beginning of 2020, 2.2-million South Africans lost their jobs, according to the quarterly labour force survey. At the time the unemployment rate — under the expanded definition, which includes discouraged work-seekers or those who have given up looking for work altogether — was 42%.
And despite signs that the country is on the path towards economic recovery, jobs have not bounced back. According to the most recent data, in the first three months of 2021, the unemployment rate reached 32.6% — the highest since the quarterly labour force survey was launched in 2008.
Worryingly, the expanded unemployment rate rose to 43.2% in the first quarter of 2021. Youth unemployment under the expanded definition was at 74.7%.
Labour market inactivity has become a common symptom of the pandemic’s economic onslaught.
The International Labour Organisation (ILO) noted in its 2021 World Employment and Social Outlook report that a total of 81-million workers (71% of those who lost their jobs as a result of the pandemic) left the labour force altogether. Many of those who left the labour market would be willing to work under normal circumstances, but could not do so because of Covid-19, the report said.
According to the ILO report, jobs are expected to recover over the next two years. But the 180-million jobs that are expected to be added by 2022 will not be enough to accommodate those who have lost their jobs as well as new labour market entrants, given the growth of the working-age population.
As is evidenced by South Africa’s statistics, the Covid-19 crisis threatens to push young people out of the labour market. The ILO report notes that workers between the ages of 15 and 25 were more likely than their adult counterparts to become inactive. The number of unemployed young people has remained essentially unchanged between 2019 and 2020 worldwide, the report points out. But this is only because many unemployed young people stopped looking for jobs or delayed their entry into the labour market.
Don’t take the R350 for granted
President Cyril Ramaphosa announced the Covid-19 social relief of distress grant in April 2020. About six million people received the R350 grant each month, according to a February statement by Minister of Social Development Lindiwe Zulu.
The DPRU report notes that the Covid-19 grant was relatively well-targeted towards the unemployed: close to 60% of the recipients did not have jobs. The chronically unemployed were 51% more likely to receive the grant relative to other groups.
In May, during her budget vote speech, Zulu spoke about how one grant recipient, Sonto Sithole from Dawn Park in Boksburg, used her R350 grant to start a baking business.
Earlier this year, the Mail & Guardian spoke to grant recipients who said they would not have survived without the money — which was still less than 10% the amount needed to buy the groceries needed to sustain the average household each month. In May 2021, the average cost of the household food basket was R4 137.11, according to the Household Affordability Index.
The DPRU study adds credence to calls by civil society to either extend the Covid-19 grant or introduce a basic income grant. “Our evidence here suggests that the Covid-19 grant has been an important, effective means of providing progressive income relief to the unemployed and informally employed, and that it has ultimately aided the labour market recovery by combating inactivity by increasing the probability of participating in the labour market,” the report reads.
“Depending on the fiscus and the trajectory of the pandemic and the labour market, policymakers ought to consider further extending the availability of the Covid-19 grant in the short or long term.”
In March, before the termination of the R350 grant, the Institute for Economic Justice analysed the affordability of a universal basic income grant to the fiscus. The institute recommended that in the short term the government should implement the grant at the food poverty line of R585 a month, using R158-billion generated through tax increases. The grant may be increased to R840 a month through additional financing from government borrowing
During her budget vote speech, Zulu said the introduction of a basic income grant has become “an urgent consideration” for the government. In the 2021-2022 financial year, the department of social development will focus on finalising policy on the basic income grant for tabling to cabinet, the minister said.