Helen Zille has come out strongly against an ANC proposal to implement a jobseeker grant saying that it will create further dependency on the state and reduce the incentive to engage in the labour market.
While this is a popular reaction to the idea of welfare grants, it is not necessarily true and many studies have proved that such programmes can have a highly positive effect on labour participation. But there are many factors at play.
The level of success depends not so much on the design of the grant programme itself, but on the reasons for unemployment.
Three cases where a welfare payout can have a highly positive impact on employment are where it is too costly for the unemployed to seek work, where financial need restricts the unemployed from access to education and where health issues due to low levels of wealth leave the jobseeker unfit to be productive in the job market. In these cases a welfare grant plays an important role in bridging the gap between the unemployed and their potential jobs.
For the second quarter of 2012, Statistics SA officially reported that 4.47 million people were unemployed but it went on to define another 2.31 million as “discouraged workseekers”. These are people who are willing and available to work but who have not recently taken steps to find work and, therefore, are not counted as unemployed.
While the critic might label this as a case of severe laziness, the real cause for such a large number lies in the geographical segregation of South Africa’s population where the poor live the furthest from the main business districts.
Low job prospects and high transport costs mean that jobseekers need to sustain a long period of financial loss before they can cement a job placement; a requirement that many simply cannot meet and an opportunity where grants can fill an important need.
In the case of skills, welfare grants can help parents to meet the expenses of sending their children to school or to seek further training themselves, help the unemployed to meet their basic nutritional needs and help jobseekers to be more competitive in the market.
Welfare grants have a series of positive affects on labour participation – the question lies in whether grants are the best way of accomplishing them?
Cash handouts are a blunt tool and aside from leading to spending on transport and education, the money spent by the government also finds its way to conspicuous spending on material goods and substance abuse such as alcohol, cigarettes and gambling – ultimately paid for by the taxpayer.
A more constructive approach would be to tackle the problems of labour participation at their core.
If transport is a problem, then it should be subsidised with priority being placed on major routes between residential and business areas.
If education is a restriction, let private and public companies roll out basic skills programmes to which job seekers can be granted free access.
And if malnutrition, for example, is barring the unemployed from engaging in the labour force, then let them receive access to food and not cash.
Policies directed at the heart of the problem will be far more effective than grand political statements promising handouts. As the ANC has not made the details of the jobseeker’s grant clear, currently it remains a party idea rather than a concrete plan.
Given its potential to create populist cheer rather than important economic and social impact its consequences and outcomes need to be carefully criticised as it matures into policy.