WP22/2010

Current poverty and income distribution in the context of South African history

Stellenbosch Working Paper Series No. WP22/2010

Author(s): Servaas van der Berg

JEL Classification: O15, D31, D63, J31, N37

Keywords: South Africa, poverty, income distribution, labour market

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Abstract:

This paper describes and analyses current poverty and income distribution in South Africa, with a central concern the relationship between poverty, inequality and growth. The paper also investigates patterns of and trends in poverty and income distribution, a literature with a long and distinguished history. Drawing from recent literature in this regard, the paper shows that the labour market – rather than access to wealth or to political and fiscal power – currently sets the limits to redistribution. Wage inequality, deeply rooted in South Africa’s history, plays a central role in overall income distribution, and patterns of human capital development are fundamental to the future growth path and therefore to poverty and income distribution. The paper therefore concludes that reducing inequality substantially is currently unlikely without a massive increase in the human capital of those presently poor, but that prospects in this regard are inauspicious.