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November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard

Presentation to: the Joint Budget Committee on the Medium Term Budget Policy Statement Employment & Social Security. November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard Employment & Economic Policy Research Programme Human Sciences Research Council Maltman@hsrc.ac.za

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November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard

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  1. Presentation to:the Joint Budget Committeeon the Medium Term Budget Policy StatementEmployment & Social Security November 19, 2003 Dr. Miriam Altman Dr. Ingrid Woolard Employment & Economic Policy Research Programme Human Sciences Research Council Maltman@hsrc.ac.za iwoolard@ hsrc.ac.za

  2. Critical dilemma • Finding balance, in context of massive social imperatives • Balance between • Social security to ensure basic standard of living • Employment & investment policy to ensure longer term labour absorbing growth path • Trade off does exist

  3. Employment

  4. Unemployment rising across race groups • Implications for most categories of workers & graduates to find work • Especially problem for black workers & graduates • Contrary to perception, still easier for white graduates in private sector

  5. Employment by sector

  6. GDP & Formal Employment If taken from 1998, formal private sector employment growing with GDP Note context: Falling real average incomes of low to medium skill formal sector workers About 500,000 people called ‘employed’ earn ‘in-kind’ and do not earn money Public sector employment seems to be weighing down on employment

  7. Employment Objectives Gov’t and ANC have unemployment goal = ½ unemployment by 2014 • This would mean unemployment at about 15.3% • Would require generation of R 4.1 mn net new jobs or avg of 372,000 jobs created annually. • Estimate that economic growth & existing interventions could result in 1.8 mn jobs • Some interventions required to address creation of remaining 2.3 mn jobs or 209,000 per year. • If created by public procurement – very serious financial implications (eg. @ R50,000 per job, would cost R 10bn per year, on additive basis)

  8. Some alternative sources being debated = ? • Infrastructure • Expanded Public Works Programmes • Expanding social services • Social security – esp for shortfall • Recognise complementarity in spending to meeting basic needs & creating employment

  9. Construction expenditure – projections (deflated)

  10. Ability to deliver???Actual and Planned Capital Expenditure of Local Government 1996 – 2001 Source - Eskom

  11. Expenditure on ECD & HIV Home Care(deflated) 2003/4 - 2005/6 estimates • Huge need, room for expansion, massive employment creator • Approx. 1.8 million people in formal community services (vs. approx 250,000 in construction) • Complementarity – ARV roll-out, orphan care, home care, ECD, etc

  12. Social Security

  13. Year households with wage-earners (m) % of households with wage-earners 1995 6.2 71.3% 1997 5.9 63.3% 1998 5.9 63.4% 1999 7.4 67.9% 2000 7.8 70.1% 2001 7.5 68.5% 2002 7.2 66.0% Household access to wage income

  14. Many poor households rely entirely on grants • Poorest 20% of households: • 19% have grants as main source of income • Next poorest 20% of households: • 28% have grants as main source of income

  15. Social Security Spending Source: SOCPEN October 2003

  16. Old Age Pension • Level of grant is more than twice average per capita income for Africans • Generous by international comparisons (1.2% of GDP) • Take-up is very high (close to 100%?) • Gender sensitive – more than twice as many women as men get the grant • Reaches many households with children

  17. Old Age Pension

  18. Child Support Grant • HSRC estimates that there are 6 million potential CSG beneficiaries under the age of 9 • Only 3.8 million have registered to date, but • Registrations have been increasing dramatically – • more than 1 million children added since March 2003 alone

  19. Disability • Number of beneficiaries grew by 36% between February & October 2003 • Regional variation suggests that take-up may continue to grow:- • e.g. in Limpopo 3% of adults receive disability grant vs 7% of adults in Eastern Cape

  20. Foster Care • 180 000 children currently • Growing slowly: AIDS orphans may  pressure Roll out of ARV should slow growth

  21. Concluding remarks • Balance between social security & employment imperatives could have serious budgetary implications in future • Required job creation to meet employment targets could cost R 10bn on additive basis. • Potential for policy complementarity • Fiscally sustainable? • Social security --- • Extended Child Support Grant. • The aging of the population • The impact of AIDS illness • Are we effectively counting potential beneficiaries? What are the possible cost implications?

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