The model of wage labour is coming to an end as unemployment rises and wages fall to unacceptable levels. Awande Buthelezi makes the case for a Universal Basic Income Grant, which government has hinted at introducing, and discusses how it could be financed and implemented.
South Africa’s post-1994 democracy inherited substantial amounts of income and wealth inequality generated during its apartheid and colonial past. Under democracy the state’s goal has been to grow and deracialise the South African economy. There has been less focus on wealth redistribution and so inequalities have deepened further since the democratic transition. The COVID-19 pandemic and the lockdown period further increased low growth and unemployment, as well as income and wealth inequality that was present before the pandemic.
This means that a great number of South Africans (mainly black) are denied a life of dignity. The economy has failed to create quality jobs on a large enough scale to meet the demand, and the government has not been able to develop a growth-based economy. High unemployment and poverty indicate that there is a crisis of wage work that goes back to decades of slow economic growth, market-oriented changes to macroeconomic policy, national development strategies, and labour market reforms.
In addition, the labour market is highly segmented – due to the difficulty for workers to transition from one sector to another – and the unemployment rate has not fallen below 20% since the late 1970s. In September 2020, the unemployment rate in the narrow definition (those looking for work) sat at 30.8% according to Statistics SA. The 2011 New Growth Path had aimed to bring unemployment down to 15% by the end of 2020.
A Universal Basic Income Grant (UBIG) or Basic Income Grant (BIG) can assist in addressing these issues.
Progressive Approach to UBIG
There are a number of different positions on the UBIG and the forms it can take. These debates can be proactive or a distraction from the crucial questions introduced by the idea of UBIG. These are questions around whether society’s wellbeing is a by-product of economic growth, with wage work the primary means of attaining citizen’s inclusion in the economy. UBIG also raises questions on the role and duty of the state to its citizens.
Broadly speaking, UBIG would take the form of a regular and guaranteed income that is paid unconditionally to all people living in the country. A progressive UBIG, which aims to positively transform society, would occur together with other social provisions such as free healthcare, free education, public transport and housing subsidies. It would also form part of a broader transformation to social and economic policies aimed at reducing poverty and inequality, while increasing human potential and wellbeing.
The by-products of a progressive UBIG are important. It would not be implemented to achieve an isolated solution put into place by an elite group of technical experts. Rather it is part of a larger strategy which aims to transform South Africa into a more just and equitable society.
Essentially UBIG is a democratic systemic reform that is owned and championed by society. These reforms are a move away from market regulations as they recognise the needs of all people and not only what business wants.
Possible Impacts of UBIG
A common concern around UBIG is that a basic income will discourage people from taking part in the labour market, and this would negatively impact on economic activity. There is little evidence that this is true. This claim is particularly misplaced in a society such as South Africa where unemployment rates are very high, particularly for low-skilled workers.
UBIG critics argue that a low basic income would subsidise employers who pay low wages and so impact on minimum wage demands made by workers. At the same time, they argue, it will weaken worker organisation and increase the power of employers in the labour market.
In fact in South African UBIG could have the reverse effect. It could cushion low-skilled workers where the threat of decreasing wages is used by employers as a stick to discourage them from demanding increases. A UBIG, even at a low amount, would allow workers to reject low-paying work, and increase the pressure on employers to raise the lowest wage that workers will take to perform a task. A person’s ability to not sell their labour at the going rate would bolster their bargaining power, including as a member of a labour collective such as a trade union.
If employers respond to these shifts in worker power with automation and layoffs, then the social argument for a UBIG only increases. UBIG’s ability to transform the society lies in providing people with an income cushion that allows them to put time and energy into tasks outside of wage work. People could engage in such things as care work, and other socially beneficial projects such as community food gardens or studying and learning new skills. We need to support these activities to build a more just and equitable society.
UBIG in this way can challenge the centrality of wage work in our society and help bring about a shift in power relations and institutional hierarchies. A UBIG alone would not result in social justice but it would be a strong step towards its achievement.
Policy varies on where to start UBIG, but a change in the social welfare infrastructure is crucial especially in the context of the suffering experienced during Covid-19.
Action groups such as the Climate Justice Charter Movement through the #UBIGNOW campaign have done much to foster support for the UBIG. Other organisations such as the Studies in Poverty and Inequality Institute (SPII), Black Sash, and the #PayTheGrants campaign have also done good work in reforming the social security infrastructure and promoting the need for UBIG.
SPII’s analytical paper titled, “The Budget, Social Security and the Basic Income Grant Alternative Synopsis” discusses the concept of a decent standard of living provided by a UBIG through a R7 500 monthly grant. This would mean the end of poverty, dependence on wage work, human well-being and a decent life. This is something to work towards and is central to a transformative approach. The Black Sash, in particular, has led a focused campaign for basic income support for all citizens aged 18-59.
Whatever level the UBIG is set at during COVID-19, this can over time be improved. It can build on existing COVID relief measures.
Financing a UBIG
The primary source of financing for UBIG will be through taxation. Some of the funding may need to come from borrowing as the current recession has led to a notable drop in tax revenue, in addition to increased debt levels.
There is also the possibility for the government’s monetary policy to assist by lowering the cost of borrowing, and ensuring on-going access to capital for the state. Government can also access funds from other state or quasi-state funds. An example of this is the surplus funds in the UIF (Unemployment Insurance Fund) which could be used as a bridging measure. These avenues of funding are healthier options than the government going into further debt to finance UBIG.
Possible forms of taxation to fund UBIG are increasing taxes on luxury goods, the carbon tax, a tax on financial transactions, and a land-value tax.
Another promising source of funding would be to put a portion of profits earned by big business into a social wealth fund that could pay out dividends to everyone in the country. For example and IPO (Initial Public Offering) is a possibility. An IPO is a process by which a private company sells shares to the general public. The company offers its shares with the help of investment banks. After IPO, the company trades its shares in an open market. Through legislation government could take a percentage of shares from IPOs and channel them towards a ‘Commons Capital Depository’. The dividends from this depository could act as funding for a UBIG.
IPO funding is an example of how a UBIG system could show how wealth in South Africa can be created collectively. Research into the implementation of UBIG shows that the primary challenge for the state is not affordability but rather one of political will.
The potential of a #UBIGNOW relies on synchronisation with other socio-economic strategies, and social forces such as pro-UBIG groups driving these interventions, and the ability to strengthen and deepen such interventions. Its implementation requires an active state which listens to political and social movements and the societal consent they are strengthening. The deepening of interventions relies on how UBIG is framed. The work done by campaigns such as #UBIGNOW have helped to achieve a clear framing and building consensus towards a UBIG.
Perhaps the biggest obstacles to overcome is the long-standing belief in wage work, the way income is distributed throughout society, the concept of citizenship, and the role of the state. UBIG should not be considered as a ‘silver bullet’ to end inequality. Rather we should see it as standing together with the struggles of grassroots forces and social movements. To separate UBIG from its social roots, would end its transformative potential.
We are currently in an unprecedented time in our country’s history. The moment calls for an approach which goes beyond a return to the normal. There is no ‘normal’ to return to in the South African context. There are challenges and unknown factors regarding UBIG’s implementation, but these can be overcome with political will and decisive leadership.
This article draws on Hein Marais’ discussion paper “How a universal basic income can help South Africa achieve a just transition” and The Institute for Economic Justice’s “Introducing a Universal Basic Income Guarantee for South Africa Towards income security for all”.
About the author
Awande Buthelezi is an organiser and researcher at the Co-operative and Policy Alternative Center (COPAC), an activist with the South African Food Sovereignty Campaign (SAFSC) and the Climate Justice Charter Movement.