An Application of the NTA Methodology to South Africa: Some Early Results Morné Oosthuizen & Toughedah Jacobs
Outline
A brief overview of the South African socioeconomic context NTA Estimates
Labour income Consumption Lifecycle deficit and first demographic dividend Public transfer inflows (and some outflows)
Some issues going forward
The South African Socioeconomic Context A brief background
Population of 47.9 million
7.0
62
6.0
60
5.0
58
4.0
56
3.0
54
2.0
52
1.0
50
42% under 20 years
0.0
48
6% over 60 years
1960
1965
1970
TFR
1975
1980
1985 Year
Pop Growth Rate
1990
1995
2000
2005
Life Expectancy at Birth
2010
TFR of 2.78 Life Expectancy (Years)
Rate (Percent)
The South African Socioeconomic Context (2005)
Population growth rate of 0.9 percent (’04-’05), range of +1.1 to -0.4 percent across race groups
Rapid decline in life expectancy at birth due to HIV/Aids (-11 years)
South African Socioeconomic Context
Apartheid legacies in terms of education, skills and location contribute towards massive unemployment, poverty and extremely high inequality
Massive state expenditure on education and health
Unemployment around 27% (narrow) or 39% (broad) Gini coefficient of 0.65-0.70 20.5% and 12.5% of non-interest spending
Extensive system of social grants
10.9 million recipients in 2005/06 (around 23% of population)
Old age: 2.1 million recipients, R820 per month Child support: 5.7 million recipients, R190 per month
But virtually no protection for working age adults
South Africa’s Lifecycle Deficit
Labour Income
Labour Income (R '000s p.a.)
50.0
Gradient (20-35 yrs) equal to 5.8% of mean YL for ages 30-49 yrs per year of age
40.0
30.0
20.0
10.0
0.0 0
10
Labour Income
20
30
40 50 Age (Years)
Employment Earnings
60
70
80
Self-Employment Earnings
90
Labour Income and Unemployment 50.0
100.0
40.0
80.0 70.0
30.0
60.0 50.0
20.0
40.0 30.0
10.0
20.0 10.0
0.0
0.0 0
10
20
30
40 50 Age (Years)
60
70
80
Labour Income
Employment Earnings
Self-Employment Earnings
Unemployment Rate
90
Unemployment Rate (%)
Labour Income (R '000s p.a.)
90.0
Does Involvement in Education Underlie the Slow Rise in Labour Income?
Proportion of Individuals (Percent)
100.0 80.0
It does not seem so...
60.0
Inactive, enrolled drops off quickly as age increases
40.0 20.0 0.0 15
20
25
30
35
40 45 Age (Years)
Inactive, not Enrolled Unemployed, not Enrolled Employed, not Enrolled
50
55
60
Inactive, Enrolled Unemployed, Enrolled Employed, Enrolled
65
Employed, enrolled and not enrolled rises relatively slowly Unemployed (broad), not enrolled peaks at 50% at age 25
Private Consumption Private Consumption, South Africa, 2005/06 25.0
Thousands of Rands
20.0 15.0 10.0 5.0 2.5 0.0 0
5
10
15 20 25
CFE
30
35 40 45 50 Age (Years) CFH
55 60 65 70
CFX
75
80 85 90
CF
Public Consumption Public Consumption, South Africa, 2005/06 10.0 9.0
Thousands of Rands
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0
5
10
15 20 25
CGE
30
35 40 45 50 Age (Years) CGH
55 60 65 70
CGX
75
80 85 90
CG
Lifecycle Deficit (per capita) 45.0 40.0
Thousands of Rands
35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 -5.0 -10.0 -15.0 0
5
10 15 20 25 30
35 40 45 50 55 60 65 70 Age (Years) YL
C
LCD
75
80 85 90
Lifecycle Deficit (aggregate) 30
R366 bn
25
R87 bn
-R34 bn
R47 bn
Millions of Rands
20 15
-R129 bn
10 5 0 -5 -10 0
5
10
15
20 25
Labour Income
30
35
40 45 50 Age (Years)
55
Consumption
60 65
70
75
80 85 90
Lifecycle Deficit
First Demographic Dividend 1.25 1.00
Percent
0.75 0.50 0.25 0.00 -0.25 -0.50 1950
1960
1970
1980
1990
2000 Year
2010
2020
2030
2040
2050
First Demographic Dividend Disaggregated 4.5 4.0 3.5
Percent
3.0 2.5 2.0 1.5 1.0 0.5 0.0 1950
1960
1970
1980
1990
Change in Effective Workers
2000 Year
2010
2020
2030
2040
Change in Effective Consumers
2050
Public Transfers
Public Transfers Inflows, Cash 9.0
Thousands of Rands (p.a.)
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0
10
20
30
40
Age
50
60
70
Unemployment Insurance etc
Family Allowances
Disability Grant
Old Age Pension
80
90
Thousands of Rands (p.a.)
Public Transfer Inflows, Cash & In-Kind 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0
10
20
30
40
Age
50
60
Unemp Insurance etc
Family Allowances
Disability Grant
Education
Health
Other
70
80
90
OA Pension
Public Transfer Outflows (Taxes)
Thousands of Rand (p.a.)
20.0
15.0
10.0
5.0
0.0 0
10
20
30
40
50
60
70
80
90
Age Taxes on Asset Income
Taxes on Labour Income
Taxes on Consumption
Public Transfers
Thousands of Rands (p.a.)
20.0
10.0
0.0
-10.0
-20.0 0
10
20
30
40
50
60
70
80
90
Age Public Transfer Inflows
Public Transfer Outflows
Net Public Transfers
Some Issues Going Forward
Differing Demographics 80+ yrs 75-79 yrs 70-74 yrs 65-69 yrs 60-64 yrs 55-59 yrs 50-54 yrs 45-49 yrs 40-44 yrs 35-39 yrs 30-34 yrs 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs 0-4 yrs 6.0
5.0
4.0
3.0
2.0 1.0 0.0 1.0 2.0 3.0 Proportion of the Population (Percent) African Male
African Female
4.0
5.0
6.0 80+ yrs 75-79 yrs 70-74 yrs 65-69 yrs 60-64 yrs 55-59 yrs 50-54 yrs 45-49 yrs 40-44 yrs 35-39 yrs 30-34 yrs 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs 0-4 yrs
6.0
5.0
4.0
3.0
2.0 1.0 0.0 1.0 2.0 3.0 Proportion of the Population (Percent) White Male
White Female
4.0
5.0
6.0
The Impact of Inequality 0.7
African White
0.6
0.4 0.3 0.2 0.1
Rands per Annum (logarithmic scale)
400 0000
200 000
100 000
50 000
25 000
10 000
5 000
2 500
0.0
1 000
Density
0.5
Relative to Average for Ages 30-49 Years
Racial differences in labour income 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 0
10
African
20
30
Coloured
40 50 Age (Years) Asian
60
70
White
80
90+
All
CFE
Racial differences in private education spending
0
10
20
30
40
50
60
70
80
Age African
Coloured
Not macro controlled. No adjustment for differing unit costs.
Asian
White
90
