In-Work Poverty in South Africa: The Impact of Income Sharing in the Presence of High Unemployment

South Africa is distinguished from other countries by its history of Apartheid, in which race-based policies resulted in vastly inferior education and labour market opportunities for African, Coloured and Asian/Indian individuals. This resulted in exceptionally high levels of poverty and inequality constructed along racial lines at the time of the transition to democracy in 1994, motivating the newly elected democratic government to make poverty alleviation a key focus of economic policy. The new political regime faced the major challenge of reforming government institutions which had historically been systematic in underproviding resources to the majority of the population. While the economic, political and social systems have undergone considerable change in the past two decades, the structural effects of colonialism and Apartheid are not easily undone. South Africa remains one of the most unequal societies in the world, resulting in persistently high levels of poverty in what is today an upper-middle income country. Using the lower bound cost of basic needs poverty line developed by Hoogeveen and Ozler (2006), the poverty headcount ratio was relatively unchanged between 1993 and 2010, falling from 56% to 54% over the period (Leibbrandt et al., 2010).