In ormation in this chapter is based on olonial rule, apartheid and natural resources: op incomes in outh A rica, , by acundo Alvaredo and Anthony B At inson entre or conomic policy research discussion paper, 2010, no. 8155), as well as on Wid.world updates.
South Africa stands out as one of the most unequal countries in the world. In 2014, the top 10% received 2/3 of national income, while the top 1% received 20% of national income.
During the twentieth century, the top 1% income share was halved between 1914 and 1993, falling from 20% to 10%. Even if these numbers must be qualified, as they are surrounded by a number of uncertainties, the trajectory is similar to that of other former dominions of the British Empire, and is partly explained by the country’s economic and political instability during the 1970s and 1980s.
During the early 1970s the previously constant racial shares of income started to change in favor of the blacks, at the expense of the whites, in a context of declining per capita incomes. But while interracial inequality fell throughout the eighties and nineties, inequality within race groups increased.
Rising black per capita incomes over the past three decades have narrowed the interracial income gap, although increasing inequality within the black and Asian/Indian population seems to have prevented any decline in total inequality.
Since the end of the Apartheid in 1994, top-income shares have increased considerably. In spite of several reforms targeting the poorest and fighting the segregationist heritage, race is still a key determinant of differences in income levels, educational attainment, job opportunities and wealth.
south africa’s dual economy is among the most unequal in the world
south africa is one of the most unequal coun-tries in the world. in 2014, the top 10% of earners captured two thirds of total income.
his contrasts ith other high-income inequality countries such as brazil, the united states and india where the top 10% is closer to 50–55% of national income. however, unli e other highly une ual countries, the divide bet een the top and the ollo ing 9% in south africa is much less pronounced than the gap bet een the top and the bottom 90%. otherwise said, in terms of top income shares, south africa ranks with the most une ual Anglo- a on countries, but, at the same time, there is less concentration ithin the upper income groups, mostly composed by the white population. the average income among the top as about our times greater than that o the ollo ing 9% in 2014 (for comparative purposes, the top 1% in the united states earn seven times more than the ollo ing , hile average income
among the top as more than seventeen times greater than the average income o the bottom it is eight times more in the nited tates It is then only logical that the income share o the top is high, capturing o national income, though this is not the largest share in the orld
he outh A rican dual economy can be urther illustrated by comparing outh A rican income levels to that of european countries.
In , the average national income per adult among the richest as , at purchasing po er parity, that is, comparable to the average or the same group in rance, pain or Italy But average national income o the bottom 90% in south africa is close to the average national income o the bottom in rance In light o these statistics, the recently debated emergence o a so-called middle class is still very elusive. rather, two societies seem to coe ist in outh A rica, one en oying living standards close to the rich or upper middle class in advanced economies, the other left behind. (Figure 2.12.1)
In 2014, the Top 1% share of national income was 21%.
Source: Alvaredo & Atkinson (2010). See wir2018.wid.world for data series and notes.
Share of national income (%)
5%
10%
15%
20%
25%
2010 2000
1990 1980
1970 1960
1950 1940
1930 1920
Top 1%
Figure 2.12.1
top 1% income share in south africa, 1914–2014
Part II trends in Global inCome inequality
World inequality report 2018 146
Inequality has decreased from the unification of south africa to the end of apartheid
outh A rica is an e ception in terms o data availability in comparison with other african countries he period or hich fiscal data are available starts in 1903 for the Cape Colony, seven years before the union of south africa was established as a dominion of the british empire, and ends in 2014, with some years sporadically missing, and noticeably an eight-year interruption ollo ing the end o apart-heid in 1994. as is often the case with histor-ical ta data series, only a very small share o the total adult population as eligible to pay ta in the first hal o the t entieth century here ore, the fiscal data rom hich e can estimate top-income shares allows us to track the top 1% income share since 1913, but only cover the top 10% of the population from
ith a long interruption bet een and 2008).
With important short run variations, the evolution of income concentration over the 1913–1993 period seems to follow a very clear long-term trend he income share o the richest 1% was more than halved between and , alling rom to appro i-mately 10%. not only did the income share attributable to the top 1% decrease, but ine uality ithin this upper group as also reduced. indeed, the share of the top 0.5%
ell more uic ly than the share o the ne t 0.5% (from percentile 99 to percentile 99.5).
Consequently, while the top 0.5% repre-sented about 75% of the top 1% in 1914, by the end of the 1980s, their representative proportion fell to 60%.
Despite the e treme social implications o the first segregationist measures that ere imple-mented in the early 1910s, these policies did not lead to large increases in income concen-tration among the top his as also a time in hich outh A rica progressively devel-oped its industrial and manu acturing sector, en oying notable accelerations in the s that ere to the benefit o the large ma ority
of the population. aside from a brief fall during the Great Depression, average real income per adult then increased steadily.
ollo ing a trend similar to other ormer dominions of the british empire (australia, Canada and new zealand) inequality decreased significantly in outh A rica rom to the beginning o the the econd World War, despite some short-run variations in the late s: the income share o the top 1% fell from 22% to 16%.
During the econd orld ar, national average continued to ollo its previous trend, but the average real income o the richest 1% took off. as a consequence of the demand shoc during the ar, the agricultural e port prices boomed, the manu acturing sector more than doubled its output between and , and profits or the oundry and engineering industries increased by more than 400%.53 o ever, the age di erential between skilled/white and unskilled/black
or ers remained e tremely large As einstein described, blac or ers ere denied any share o the gro ing income in the ne economy they ere creating 54 the fact that the peak in the income share of the top as high as in as concomi-tant with the war effort thus seems essen-tially due to a brief enrichment of the upper class.
In contrast, income gro th in the s as more inclusive, as average real income per adult increased by 29% between 1949 and , hile the average real income o the top slightly decreased By the income share of the top 1% had fallen to around In the s, both averages gre appro imately at the same rate such that inequality remained relatively constant.
ollo ing years o successive increases, national average income as almost our times greater by the early s than in Ine uality resumed its do n ard sloping trend from 1973, but this also marked a period o overall income gro th stagnation in south africa until 1990 that culminated in a three-year recession.
or the first time in the previous years, gold output started alling icher seams ere e hausted and e traction costs increased rapidly. the industry that was once the engine o the economy started to weaken. increases in oil prices and other commodities accelerated inflation dramati-cally, averaging about per year bet een 1975 and 1992. in the 1980s, international sanctions and boycotts were placed on south african trade as a response to the apartheid regime, adding urther pressure to that created by domestic protests and revolts, and contributed to the destabiliza-tion o the regime in place hite dominance
as challenged on both economic and polit-ical grounds, to hich the ruling government progressively made concessions, recogni ing trade unions and the right to bargain or ages and conditions this could partly e plain hy the average real income per adult of the top 1% decreased faster than the national average Figure 2.12.2)
the progressive policies implemented after the apartheid were not sufficient to counter a profoundly unequal socio-economic structure
here are no fiscal data to estimate top-income shares or the eight years that ollo ed
o ever, oining up the data points to the ne t available figure in suggests that income inequality has increased sharply between the end of apartheid and the present, even if the magnitude o the increase must be ta en ith caution, as the estimates in these two periods may not be totally comparable. the income share o the top increased by per-centage points rom to art o the increase from 1993 to 2002 should come from changes in the ta code In particular, be ore , capital gains ere totally e cluded, which is very likely to downward bias the share o top-income groups Also, the ta collection capabilities seem to have increased substan-tially in the last years hat being said, using
€2 000
Average real income per adult (2016 € PPP) Average real income of the Top 1% (2016 € PPP)
In 2014, the average income per adult in South Africa was €13 750 (R107 300), while the average income of the Top 1% was €290 500 (R2 266 000). All values have been converted into 2016 Purchasing Power Parity (PPP) euros at a rate of €1 = $1.3 = R7.8. PPP accounts for differences in the cost of living between countries.
Values are net o inflation
Source: Alvaredo & Atkinson (2010). See wir2018.wid.world for data series and notes.
Average per-adult national income
Average income of the Top 1%
Figure 2.12.2
average income per adult and average income of the top 1% in south africa, 1914–2014
Part II trends in Global inCome inequality
World inequality report 2018 148
household survey data for the years 1993, 2000 and 2008 research has demonstrated that in e uality increased significantly during the period or hich e have no fiscal data55 At first, it might seem pu ling that the abol-ishment o a segregationist regime as ollo ed by an aggravation o economic inequality. the establishment of a multi-racial democracy, with a new constitution and a president o the same ethnic origin as the majority of the population, did not automati-cally transform the inherited socio-economic structure of a profoundly unequal country.
Interracial ine uality did all throughout the eighties and nineties, but ine uality ithin race groups increased: rising blac per capita incomes over the past three decades have narro ed the blac - hite income gap, although increasing ine uality ithin the black and asian/indian population seems to have prevented any decline in aggregate ine uality In e plaining these changes scholars agree in that the labor mar et played a dominant role, where a rise in the number o blac s employed in s illed obs including civil service and other high-paying govern-ment positions coupled ith increasing mean
ages or this group o or ers
since 1994, several redistributive social poli-cies have been implemented and/or e tended, among hich important unconditional cash trans ers targeting the most e posed groups (children, disabled and the elderly). at the same time, top marginal ta rates on personal income ere ept relatively high and recently increased to 45%. however, in spite of these redistributive policy efforts, surveys consis-tently sho that top-income groups are still over helmingly hite ther studies urther demonstrate that such dualism is itself salient along other ey dimensions such as unem-ployment and education. furthermore wealth, and in particular land, is still very unequally distributed. in 1913, the south african parliament passed the natives land act which restricted land ownership for afri-cans to specified area, amounting to only of the country’s total land area, and by the
early 1990s, less than 70 000 white farmers o ned about o agriculture land56 some land reforms have been implemented, but ith seemingly poor results,57 and it is likely that the situation has not improved much since, although precise data about the recent distribution of land still needs to be collected.
Given this socio-economic structure, the interruption of the international boycotts in might have more directly avored a minority o high s illed and/or richer indi-viduals ho ere able to benefit rom the international markets, which therefore contributed to increase inequality. this hypothesis ould also e plain the act that income inequality in south africa did not increase in the 1980s, while boycotts were put in place, contrary to other former domin-ions (new zealand, Canada and australia) despite the country having so ar ollo ed a similar trend. furthermore, the implementa-tion of the Growth, employment and redis-tribution G A program in , hich consisted o removing trade barriers, liberal-i liberal-ing capliberal-ital flo s and reducliberal-ing fliberal-iscal defliberal-icliberal-it might also have contributed, at least in the short run, to enrich the most well off while e posing the most vulnerable, in part by increasing returns to capital over labor and to skilled workers over unskilled workers.
he rapid gro th e perienced rom the early 2000s until the mid-2010s was essentially driven by the rise in commodity prices and as not accompanied ith significant ob creation as the government hoped it ould he income share o the top gre rom just less than 18% in 2002 to over 21% in , then decreased by about percentage points and increased again in as prices reached a second peak. the fact that these variations closely mirror the fluctuation in commodity prices suggest that a minority benefiting rom resource rents could have granted themselves a more than proportional share o gro th
lastly, it should be stressed that the top 1%
only represents a small part of the broader
top 10% elite which is mostly white. While the share of income held by the top 1% is rela-tively low as compared to other high inequality regions such as Brazil or the Middle East, the income share of the top 10% group is extreme in South Africa (Figure 2.12.3). The historical
trajectory of the top 10% group may be different to that of the top 1%—potentially with less ups and downs throughout the 20th century. Unfortunately at this stage, historical data on the top 10% group does not go as far back in time as for the top 1% group."
0%
10%
20%
30%
40%
50%
60%
70%
Top 1%
Top 10 %
In 2012, the Top 10% share of national income was 65% in South Africa, while it was 55% in Brazil in 2015. Income shares correspond to the latest year available (2012 for South Africa, 2015 for the Middle East, 2015 for Brazil).
Source: Alvaredo & Atkinson (2010), WID.world (2017). See wir2018.wid.world for data series and notes.
Share of national income (%)
South Africa (2012) Middle East (2015) Brazil (2015) Figure 2.12.3
South Africa: the world’s highest top 10% income share, but not the highest top 1% share
PArt II TrEndS in gloBAl incoME inEqUAliTy
World inEqUAliTy rEporT 2018 150
notes
Beyond the Bottom Billion: A apid evie o Income Distribution in ountries, NI ocial and conomic olicy or ing
aper, NI , April , https:// unice org/socialpolicy/
iles/Global Ine uality pd or e isting global ealth reports, see the Global ealth eport , redit uisse esearch Institute,
redit uisse AG, Zurich, November , http://publications credit-suisse com/tas s/render/ ile/inde c m ileid AD -ed07-e8C2-4405996b5b02a32e.
2 La ner and Milanovic, Global Income Distribution: rom the all o the Berlin all to the Great ecession
3 J tiglit , A en, and J itoussi, eport by the ommission on the Measurement o conomic er ormance and ocial rogress, aris, http://ec europa eu/eurostat/documents/ / / fitoussi+Commission+report.
4 Measured at mar et e change rate At purchasing po er parity, the corresponding value is
5 G Zucman, he Missing ealth o Nations: Are urope and the Net Debtors or Net reditors Quarterly Journal of Economics , no :
6 ur igures or the uropean nion include all countries on the european continent, apart from russia and ukraine.
7 t. piketty, Capital in the Twenty-First Century ambridge MA:
belknap press of harvard university press, 2014).
8 Not represented on the graph or the sa e o clarity eaders system as more progressive at the very top in
11 he gro th in Medicare and Medicaid trans ers re lects an increase in the generosity o the bene its, but also the rise in the price of health services provided by medicare and medicaid—
possibly above hat people ould be illing to pay on a private mar et ee, or e ample, A in elstein, N endren, and
Luttmer, he Value o Medicaid: Interpreting esults rom the regon ealth are periment, NB or ing aper no
, National Bureau o conomic esearch, June , http://
nber org/papers/ pd and perhaps an increase in the economic surplus of health providers in the medical and pharmaceutical sector.
12 In turn, most o the gro th o the post-ta income o the elderly americans in the bottom 50% has been due to the rise of health bene its ithout Medicare and Medicaid hich cover nursing home costs or poor elderly Americans average post-ta income or the bottom seniors ould have stagnated at since the early 2000s, and would have increased only modestly since the early 1980s when it was around $15 500.
13 piketty, Capital in the Twenty-First Century.
14 ee ae , a ing the ich More: reliminary vidence rom
cbo gov/sites/de ault/ iles/ th-congress- / reports/ -householdincome edta es pd
16 In eeping ith the national accounts conventions, the nonre undable portion o ta credits and ta deductions are treated
as negative ta es, hile the re undable portion o ta credits are seen as trans ers ubse uently, nobody can have negative income ta es
17 his general periodi ation is relatively ell no n and has been studied else here see in particular ee i etty, Income Ine uality in rance, , Journal of Political Economy 111, no : and i etty, Capital in the Twenty-First Century.
18 ee i etty, Income Ine uality in rance, , and piketty, Capital in the Twenty-First Century.
19 see piketty, Capital in the Twenty-First Century, ch. 9 in particular.
20 i etty, ae , and tantcheva, ptimal a ation o op Labor Incomes: A ale o hree lasticities, American Economic Journal: Economic Policy , no :
21 A Bo io, Dauvergne, B abre, J Goupille, and Meslin iscalit et redistribution en rance, , apport I ,
ee in particular p or ta rates on primary incomes be ore pensions and unemployment insurance and p or ta rates on secondary incomes including pensions and unemployment insurance In the ormer case, ta rates at the top are lo er than or any other income group In the latter case, ta rates are lo er or the bottom than or the richest, but the middle class has a higher total ta rate than the top
22 erguson and -J Voth, Betting on itler: he Value o olitical onnections in Na i Germany, Quarterly Journal of
22 erguson and -J Voth, Betting on itler: he Value o olitical onnections in Na i Germany, Quarterly Journal of