Paid employment is generally considered the predominant and most sustainable way of pulling people out of poverty. But the past two decades have seen a global rise in the complex phenomenon of the working poor. South Africa is no exception.
This delink between paid employment and poverty reduction is a major challenge for the government. It means that attention must be given to two things: rapid job creation, and also the creation of decent jobs.
While one may think that being employed suggests the person is immediately pulled out of poverty, this is not always the case. Finding a job does not guarantee someone will receive remuneration that is high enough to cover their basic needs and be relatively secure financially. In some cases, workers reluctantly only work part-time after failing to find full-time work.
Some workers are paid wages below the amount that’s necessary to maintain a decent living standard. They are also not entitled to health or retirement benefits. Low-wage work is also associated with poor working conditions and job insecurity. These include poor health and safety standards, discrimination and excessive work hours.
In other words, for some workers employment no longer guarantees significant poverty reduction. Some workers remain poor because wages are too low to lift them and their families out of poverty.
Comprehensive information on the extent of low-wage working poverty in South Africa wasn’t available until our recently published study. We examined the data from the first four waves of the National Income Dynamics Study (NIDS), which took place between 2008 and 2015. NIDS is South Africa’s first national household panel study.
We found that while low-wage poverty probability declined during the 7-year period, in 2015 nearly 20% of workers were still identified as low-wage poor employed. This downward trend is similar to what was found by a 2015 study for the 1997-2012 period, though that piece of research focused on working poverty and didn’t take the low wage threshold into consideration.
When it comes to demographics, low-wage poor were identified as predominantly women (slightly above 50%), Africans (90%), 38 years old on average, without 12 years of education. On average there were five members per household, and two of them were working.
Most low-wage poor were involved in elementary occupations. They were street vendors, domestic helpers and cleaners, and garbage collectors. And nearly 75% of this group were in the informal sector, which is associated with a lack of job security and benefits. This finding is concerning, given the fact that the informal sector only contributes about 7% of the country’s GDP.
What should government do?
There are ways for the government to address these issues.
Policy is a key area where changes can be made. The government should focus on policy that provides affordable quality education and skills training to previously disadvantaged communities. Moreover, education and training programmes should focus on skills and competencies demanded by the labour market.
Low-wage poverty is highly associated with the unstable work environments and insecurity that are experienced by workers in the informal sector, and workers with low-skilled occupations like domestic workers and street vendors. Policy prescriptions should therefore aim to promote economic growth and infrastructure development within the informal sector. They should also focus on increasing awareness and enforcement of labour regulations that protect workers in low-skilled or elementary occupations.