The Reality of Income Inequality & Job Seeking

The Reality of Income Inequality & Job Seeking

August 1, 2019 4260 By Jovan Markovic

During this year’s IEP project I have taken an interest in the uneven income distribution in South Africa. Namely, the GINI coefficient, a statistical measure of income inequality in a country, is the highest in South Africa (0.63). This means that the income distribution in South Africa is the most uneven in the world where the top 10% of the population in terms of income being responsible for 50% of the GDP. On the other hand the bottom 20% account for 1.5% of the GDP. This inequality is related to race as the population on the lower side of the income spectrum is mostly black or colored. I was mainly interested in the attitudes the occupants of different sectors had towards this situation. Whether they believe anything should be done about this income gap. Should the government intervene or is it more a matter of motivation and proactively improving one’s situation. I sat down with a colored entrepreneur who owns his own transportation service to get his thoughts on the subject.

The GINI coefficient in SA is currently 0.63 (income inequality), the highest in the world. Why do you think this is the case?

Right now unemployment is really high, officially 28% and that’s just the people looking for work. Then there’s another 20% who have stopped looking and have turned to making ends meet in their own ways. One of the things I think is responsible for the inequality, other than corrupt politicians lining their pockets and feeding their families, is the lack of cross-trade between South Africa and the neighboring states. Our borders are open but there is not enough trade. If you look at Europe, it has one of the most beautiful models of cross-trade between the nations. In Africa, in general, that is one of the factors slowing down our growth.

Within South Africa specifically, the top 10% is responsible for 50% of the GDP while the bottom 40% is responsible for barely 20%. Why do you think the income distribution is so skewed?

I think this stems from the structure South Africa just came out of. A lot of wealth the 10% posses is wealth accumulated from colonialism and has been sustained through apartheid. In 1994 after Apartheid has fallen, the wealth did not transfer but stayed with the top 10%.

Do you think those reasons are apparent to all parts of SA society and could be easily deduced by everyone?

I think that at the moment it’s common knowledge. The major wealth gap and the reasons for it have been constantly reiterated. No matter where you live in the city you will know that a lot of the inequality stems from faulty wealth handover. Even to a layman, it is clear that wealth hasn’t been shared properly.

Does this issue call for government intervention or will the market fix itself?

We do not want the government to be messing with the market too much in terms of setting prices. It would be more advantageous if the traders set their own prices. One thing that could help us is a policy of cross trading. There is a lot of wealth and possible job-creating stemming from cross trading and so far the African continent has not been utilizing that potential. If the government implements a policy of free cross-continental trade we will have better opportunities to keep the money in the continent. Secondly, if free continental trade was implemented we would further benefit from a policy reducing trade tariffs. 

How do you see this benefiting the poor?

Africa has a very strong agricultural basis this trade agreement could tap into. For example, there is a lot of tomato farmers in South Africa. So if we were to trade with a nation like Nigeria, one of the largest tomato consumers in the world, tomato farmers would increase their profits. With international trade implemented farmers would be able to grow their business leading to their families being enriched. This is just one of the examples.

Do you think the implementation of free continental trade will have any effect on the unemployment rate?

Definitely. If you look at countries like Kenya and Ethiopia, the leading countries on the continent in terms of technology, they have entered this fort-industrial revolution while South Africa is far behind. Through trade we could learn the skills and knowledge of the more technologically advanced countries, thus opening new possibilities for job creation.

Why do you think these policies have not yet been implemented?

This is an issue of the bureaucracy. After government sets the policies there is the bureaucracy that slows everything down. The civil society should speak up to break through the slowness of the bureaucracy and start implementing the set government policies. We recently had our president Cyril Ramaphosa deliver the State of the Nation Address and setting interesting goals for the country, However, at the debate, many parties were crying out for a direction of policy implementation. Currently, that’s our failure as a nation, the slow bureaucratic process is blocking us from efficient policy implementation. For myself as an entrepreneur, I have experienced that as well, there is not much help from the government. I go to the bank and they send me to the Cedar Group, an organization that helps small businesses, from which they will send you to a national youth fund. So you go from pillar to post on your expense and time. It’s really ineffective and that’s why I have decided to stop looking to the government for help and started winging it on my own.

Do you have a university degree?

No, but I studied mechanical engineering at a technical school and I was working at the same time. Unfortunately, I was entrenched and I couldn’t support my studies anymore so I was forced to terminate them.

How did you acquire your current job position? 

How I ended up being a driver is quite a fun story. I always enjoyed backpacking and traveling and last year I was a guest at this hostel. A guy from Miami walked in and asked me if I could give him a ride to Sea Point. At first, I said no but the man was very persistent so I ended up giving him a ride. Later on, the same guy kept going around the hostel, it was January peak season, and marketing me to other guests. He told them there was a guy in Zebra Crossing who owned a car and would drive them on request. For the next two weeks, all the people I’ve driven have come to know about me through him. 

Are you satisfied with your job position?

Yes I am but I’m also very ambitious and would love to expand my business.

Ideally, would you like to do anything else? 

To be honest, I wouldn’t. I have found my joy in working with people. I found it much more interesting than working with machinery. The money might not be the same but the fact that I can meet people from all over the world is priceless. Passengers come to me, they sit in my car and I get to have a conversation with them. Over the course of my career, I’ve heard many interesting stories and no two conversations were ever the same.

Do you think all people in SA have similar job-seeking opportunities?

Not really. In 1996 this policy called Affirmative Action was implemented to try to equal out the labor quotas. Certain positions and sectors, banking and finance, for example, were dominated by whites and coloreds with not enough blacks. The problem with Affirmative Action is that it went way overboard due to mismanagement. What we’re finding now that certain employees occupy positions they know next to nothing about because of the quota that is to be filled. Affirmative Action has failed and that’s why work opportunities are unequal here.

So who suffers in the midst of all this?

The people that suffer are mostly white, colored or Indian. 

If Affirmative Action is unchecked what could be done to level the playing field?

Hiring people based on merit, maybe on an equity basis. 

Do you have a positive or negative outlook on the future of equality in SA?

There’s a lot of issues to resolve but I’m staying optimistic. We’ve overcome Apartheid and are the only country on the continent not to have had a civil war. Now it’s just a matter of the government and the civil society working together