IMPLEMENTING a basic income grant (BIG) can reduce poverty, inequality and boost economic growth and employment, according to an Applied Development Research Solution (ADRS) and the Institute for Economic Justice (IEJ) report.
The report, titled Macroeconomic and Developmental Impacts of Selected Basic Income Grant Pathways for South Africa, highlights the transformative impact of a BIG for South Africa.
According to the report, in a highly unequal society like South Africa, with half of the population living in poverty, a BIG is a means of enabling limited redistribution to the poorest.
“It should be no surprise that the richer citizens will need to pay their fair share,” it said.
The report said the expansion of the social grants system in South Africa had been one the successes of the post-apartheid government. Most notably, the Child Support Grant (CSG) and the old age pension grant had provided critical support to children, the elderly and their families.
“However, the exclusive focus on these two groups has left a significant proportion of South Africans without any guaranteed income support –a situation that is dire given the high levels of unemployment,” the report found.
The report said the introduction of the Special Covid-19 Social Relief of Distress (SRD) grant in May 2020 and its extensions since then, however, had brought the debate on a BIG once again to the fore and changed the landscape of political possibility.
“The call for a basic income has also been amplified globally with a number of pilot projects being launched around the world,” it said.
ADRS global chief executive and author of the report Asghar Adelzadeh said“ “Our Dynamically Integrated Macro-Micro Simulation Model of South Africa (DIMMSIM) reveals that with reasonable funding pathways, BIG can be a catalyst for positive outcomes—reducing poverty and inequality while enhancing economic growth and employment.”
The study proposes a funding strategy involving a small wealth tax and Social Security Tax (SST), demonstrating that a BIG can be implemented without changes to income tax or VAT regimes.
“The outcomes would be significant, and have a whole of society impact, potentially reducing child mortality, hunger, crime, and a cyclical poverty trap,” the report found.
IEJ executive director Gilad Isaacs said: “The study's findings are a testament to the transformative potential of a Basic Income Grant in reshaping our economic landscape. They provide evidence that challenges existing norms and opens new possibilities for inclusive growth.
“If we implement a BIG, it can substantially reduce income poverty, contributing to a more equitable society."
The report said a BIG helps shift the significant gender and racial inequalities embedded in the South African political economy, it can help improve labour market participation, and it can increase the ability for people to generate their own sustainable livelihoods.
“A BIG can improve the economic sustainability and stability of poor communities and the country.”
The study emphasises the need for policymakers to reconsider preconceived notions about the economic impact of social assistance programmes.
* Maleke is the Personal Finance content editor.
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