Inequality may appear straightforward but the subject is more complex than measures like the Gini coefficient make it seem.
The Gini coefficient is a ratio with values between 0 and 1. At 0, everyone has the same income, and at 1, one person has it all. It is the most widely used measure of inequality.
Yet while it is relatively easy to calculate the Gini coefficient, “the reasons for inequality are imperfectly understood and hard to establish”, economist and senior researcher at the Helen Suzman Foundation, Dr Charles Simkins, wrote in an article.
He added that in South Africa, “we simply do not have the required data and, despite the government’s insistence on the centrality of inequality, the state does not collect information of sufficient quality to allow for reliable inferences to be drawn”.
Inequality has increased globally
A discussion of urban inequality in South Africa must first be contextualised by looking at the global picture.
UN Habitat’s World Cities Report 2016 stated that 75% of cities across the world have become more unequal over the past two decades. The report listed a set of challenges besetting cities in the era of globalisation. This includes access and rights to opportunities, employment, income, livelihoods, municipal services, urban spaces and affordable public transport.
Probably most familiar to South Africans, however, would be a description of the unequal urban reality in many cities around the world: “The spatial concentration of low-income, unskilled workers in segregated residential quarters acts as a poverty trap with severe job restrictions, high rates of gender disparities, deteriorated living conditions, social exclusion and marginalisation and high incidences of crime.”
Of course, the challenges around spatial transformation in South African cities are quite unique (and acute) as a result of the legacy of apartheid urban planning. In the 2016 State of South African Cities report, produced by the South African Cities Network, spatial transformation is regarded as a key element in reducing urban inequality and a whole chapter is dedicated to the topic.
How to measure inequality
Although there are other measures of inequality, like the Theil Index, in practice they are not as widely used as the Gini coefficient.
Most analysts stress the relative nature of the Gini coefficient as the result depends on how income or wealth is measured. Simkins elaborated. “Are we talking about wealth? The earnings of people in employment? The income before, or after, taxation and public expenditure? Consumption? Or something more complex, like the relative share of value accruing to labour or capital, or to different race groups?”
Researchers from the economic performance and development programme at the Human Sciences Research Council listed further limitations to the Gini coefficient in an article. These include that it does not capture income generated in the informal sector; nor the impact of social benefits and interventions aimed at bridging the gap between rich and poor, such as subsidised housing, healthcare, education and social grants.
The authors of the Inclusive Cities chapter in the 2016 State of South African Cities report raised a similar concern: “Income inequality, as measured by the Gini coefficient, is insufficient to describe what’s happening within urban communities and should not be interpreted as separately from a qualitative understanding of what is a decent livelihood.”
As a result, the Gini coefficient is often used alongside other measurements of quality of life. One such indicator is the United Nations Development Programme’s Human Development Index. It combines people’s life expectancy, their average years of schooling and per capita income to produce a score between 0 and 1. The higher the score, the better.
The 2016 State of South African Cities report lists the following human development indexes for South Africa’s metros in 2013:
Inequality data at metro level is problematic
Despite reservations about the Gini coefficient, it remains the standard measure of income inequality. Yet Statistics South Africa does not calculate inequality statistics at metro level, the agency’s executive manager of poverty and inequality statistics, Nozipho Shabalala, told Africa Check.
Researchers working in the urban local government field acknowledge that this data is not always perfect, development economist in the eThekwini municipality’s department of economic development, Tshegang Chipeya, told Africa Check. But, she added, they have had to adopt a pragmatic approach and regard “the accessibility, convenience and comparability of data derived from the subscription sites as an often welcome trade-off”.
The inequality data for the 2016 State of South African Cities report was sourced from IHS Global Insight. All South Africa’s cities scored above 0.6, which indicates extremely high levels of inequality.
The country manager for South Africa at IHS Global Insight, Gerhard Bijker, told Africa Check they calculate the Gini coefficients based on household income, which includes salaries and wages, income earned from an own business, rental income and transfers, such as social grants and pensions. However, he did not respond to a question asking for the source of this information.
All in all, the differences between the cities are small. The executive manager of programmes at the South African Cities Network, Dr Geci Karuri-Sebina, told Africa Check they share the data “not to rank cities or pitch” cities against each other.
“It is to support a local government developmental agenda that uses the tracking of progress (or decline) as a means to advancing improvements in governance and practice, which are badly needed in all of our cities,” she said. – 04/11/2016