These are the key insights from the ECO3020 week 6 readings (Corak, Piraino, Finn and Kerr). They are perfect for answering tutorial questions and for test/exam preparation!
Wealth/income equality, social class and mobility in SA
• The Gini coefficient based on income is 0.7.
• The Gini coefficient based on wealth is 0.9-0.95.
• Initial endowments (social, human, physical capital, etc.) are important in determining
welfare and the distribution of wealth and income.
• Inequality in SA is highly racialised, and can be traced back to at least Apartheid.
• Per capita income, relative to white people (100%):
- A Black person has 13%.
- A Coloured person has 22%.
- An Asian person has 60%.
• Consider the time element of inequality – intergenerational socio-economic mobility.
• Intergenerational persistence is high in SA, as many people are struck in poverty traps.
• People below the poverty line:
- Chronically poor (40-50%) = People currently in poverty and have a below likelihood
of escaping poverty.
- Transient poor (10%) = People currently in poverty and have an above average
likelihood of escaping poverty.
• People above the poverty line:
- Vulnerable (15%) = People who are currently not in poverty and have an above
average risk of slipping into poverty.
- Middle class (20%) = People who are currently not in poverty and have a below
average risk of slipping into poverty.
- Elite (4%) = People at no risk of falling into poverty.
• 95% of “chronically poor” people are Black.
• 65% of “elite” people are White.
Corak, 2013 (income inequality, equality of opportunity and intergenerational mobility)
• Intergenerational mobility = The extent to which one’s circumstances of birth
determines their future outcomes (specifically father-son earnings, because there have
been big shifts in women’s labour force participation over the few decades).
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