‘Distress grant’ misses the mark
Research suggests that the hard lockdown, together with an initial lack of government relief measures, pushed about 1-million of the workers who lost their jobs into poverty
Covid-19 has devastated SA’s labour market. Recently released data from the National Income Dynamics Study: Coronavirus Rapid Mobile Survey (Nids-Cram) suggests there has been a net decrease in active employment of about 40% from February to April. It seems that about half of this drop could be attributed to people who have been either temporarily laid off or put on paid leave, but the other half is the result of terminated employment relationships, threatening potentially long-lasting changes to the labour market.
With level 5 of the lockdown in effect in April, and very few of the government’s Covid relief interventions in place at that point, about 1-million of the workers who lost their jobs fell into poverty, according to new research by Ronak Jain, Joshua Budlender, Rocco Zizzamia and Ihsaan Bassier. While a recovery is expected in the labour market with the opening of the economy, the high rate of apparent job terminations means the rebound is likely to be slow.
The labour market shock has also worsened existing inequalities. Women, those in manual occupations, informal workers, and poorer and disadvantaged workers in general have experienced the greatest employment losses. It is likely this unequal impact will be enduring, as it is these groups of vulnerable workers who will find it hardest to return to employment.
Between 15% and 30% of those who lost jobs during the hard lockdown fell into poverty in April
The Covid-19 shock also devastated labour earnings for millions of households. In the absence of data on pre-lockdown household income, we cannot directly observe poverty changes over the lockdown period. To gain a sense of these changes, Jain and her co-authors matched job-losers and job-keepers who have similar education and types of jobs, among other characteristics, and then compared their lockdown household incomes. This approach suggests that between 15% and 30% of those who lost jobs during the hard lockdown fell into poverty in April, depending on which poverty line is used.
The Nids-Cram survey asked mainly about people’s situations in April, when the level 5 lockdown was in place but the government’s Covid-19 basic package of support had yet to be implemented. The slow pace of the economic policy intervention, and the weaknesses of the existing pre-Covid-19 support structure, left a vast group of vulnerable workers unprotected. While the temporary employer/employee relief scheme (Ters) was in place, only one in five workers who were furloughed because of Covid-19 (with or without pay) reported receiving Ters benefits. Again, the poorest and most vulnerable workers were least likely to receive this support. We estimate that the poverty impact of the pandemic could have been mitigated if the government had introduced its Covid-19 basic package of support earlier.
The child support grant — topped up in May — reached the households of six out of every 10 workers whose employment was terminated. However, the households of three in 10 had no income from grants at all. Very few of the respondents surveyed in May and June reported receiving the new social relief of distress grant (SRDG) — which is unsurprising, given its well-publicised implementation failures.
The delays and implementation failures of the Covid-19 basic package of support have come at a huge social cost. They show the weaknesses of SA’s existing social support structures for those who lose jobs.
While there will be some labour market recovery in the following months, the data suggests that the increase in unemployment will persist well beyond the immediate public health crisis, and that the labour market that emerges after the Covid-19 crisis may be even more unequal than the one that preceded it.
Forthcoming waves of Nids-Cram will allow us to evaluate these developments, as well as the impacts of government emergency relief.
What it means:
The high rate of apparent job terminations means the rebound is likely to be slow
The government’s Covid-19 social and economic policy plan needs to account for the scale of job loss and the threat of enduring damage to society and the economy. Getting right the existing grant implementation systems, such as the SRDG, ought to be a first-order priority. Social assistance should mitigate the poverty impact on those who lose jobs, given that far too many are left with no income at all. In addition, workers and firms alike would stand to benefit from stronger worker-targeted social protections.
Apart from directly mitigating the immediate impact of job losses on poverty, these protections would make it easier for firms to temporarily lay off workers rather than terminate employment relationships entirely, with ensuing benefits for the long-term health of the SA labour market.
*Bassier and Budlender are PhD candidates in economics at the University of Massachusetts; Jain is a PhD candidate in economics at Harvard University; Leibbrandt is a professor in the school of economics at the University of Cape Town and the director of the SA labour & development research unit (Saldru); Zizzamia is a research officer at Saldru and a DPhil candidate in international development at the University of Oxford.
For more information on the Nids-Cram survey, visit http://www.cramsurvey.org
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