Well-being poverty versus income poverty and capabilities poverty?

The conventional approach of economists to the measurement of poverty in poor countries is to use measures of income or consumption. This has been challenged by those who favour broader criteria for poverty and its avoidance. These include the fulfilment of 'basic needs', the 'capabilities' to be and to do things of intrinsic worth, and safety from insecurity and vulnerability. This paper asks: to what extent are these different concepts measurable, to what extent are they competing and to what extent complementary, and is it possible for them to be accommodated within an encompassing framework? There are two remarkable gaps in the rapidly growing literature on subjective well-being. First, reflecting the availability of data, there is little research on poor countries. Second, within any country, there is little research on the relationship between well-being and the notion of poverty. This paper attempts to fill these gaps. Any attempt to define poverty involves a value judgement as to what constitutes a good quality of life or a bad one. We argue that an approach which examines the individuals own perception of well-being is less imperfect, or more quantifiable, or both, as a guide to forming that value judgement than are the other potential approaches. We develop a methodology for using subjective well-being as the criterion for poverty, and illustrate its use by reference to a South African data set containing much socio-economic information on the individual, the household and the community, as well as information on reported well- being. We conclude that it is possible to view subjective well-being as an encompassing concept, which permits us to quantify the relevance and importance of the other approaches and of their component variables. The estimated well-being functions for South Africa contain some variables corresponding to the income approach, some to the basic needs (or physical functioning)approach, some to the relative (or social functioning) approach, and some to the security approach. Thus, our methodology effectively provides weights of the relative importance of these various components of well-being poverty.

Race and the Incidence of Unemployment in South Africa

South Africa.s unemployment rate is one of the highest in the world, and it has important distributional implications. The paper examines the incidence of unemployment using two national household surveys for the mid-1990s. Both entry to unemployment and the duration of unemployment are examined. A probit model of the determinants of unemployment is estimated: it shows an important role for race, education, age, gender, home-ownership, location, and numerous other variables, all of which have plausible explanations. The large race gap in unemployment is explored further by means of a decomposition analysis akin to that normally used to analyse wage discrimination. There remains a substantial residual that cannot be explained by observed characteristics, and which might represent unobserved characteristics, such as quality of education, or discrimination. Implications for policy and for research are drawn.Unemployment, South Africa, racial discrimination

Community, Comparisons and Subjective Well-being in a Divided Society

Using a South African data set, the paper poses six questions about the determinants of subjective well-being. Much of the paper is concerned with the role of relative concepts. We find that comparator income – measured as average income of others in the local residential cluster - enters the household’s utility function positively but that income of more distant others (others in the district or province) enters negatively. The ordered probit equations indicate that, as well as comparator groups based on spatial proximity, race-based comparator groups are important in the racially divided South African society. It is also found that relative income is more important to happiness at higher levels of absolute income. Potential explanations of these results, and their implications, are considered.Subjective well-being; happiness; comparator groups; altruism; envy; relative deprivation; standard-setting; race; South Africa

Race and the Incidence of Unemployment in South Africa

South Africans unemployment rate is one of the highest in the world, and it has important distributional implications. The paper examines the incidence of unemployment using two national household surveys for the mid-1990s. Both entry to unemployment and the duration of unemployment are examined. A probit model of the determinants of unemployment is estimated: it shows an important role for race, education, age, gender, home-ownership, location, and numerous other variables, all of which have plausible explanations. The large race gap in unemployment is explored further by means of a decomposition analysis akin to that normally used to analyse wage discrimination. There remains a substantial residual that cannot be explained by observed characteristics, and which might represent unobserved characteristics, such as quality of education, or discrimination. Implications for policy and for research are drawn.Unemployment, South Africa, racial discrimination

Unemployment in South Africa: the nature of the beast

Unemployment in South Africa is so widespread that it demands an explanation. This paper examines two questions about South African unemployment. Firstly, why do the unemployed not enter the informal sector, as is common in other developing countries? Secondly, why do the unemployed not enter wage employment more readily? The findings provide little support for the idea that unemployed people choose to be unemployed: the unemployed are substantially worse off, and less satisfied with their quality of life, than they would be if informally employed. Various impediments to entry into the informal sector increase open unemployment. The test of the hypothesis that the unemployed have unrealistically high wage aspirations suggests that the commonly reported high reservation wages (relative to predicted wages) are not to be interpreted as reflecting unwillingness to work.

Well-being poverty versus income poverty and capabilities poverty?

The conventional approach of economists to the measurement of poverty in poor countries is to use measures of income or consumption. This has been challenged by those who favour broader criteria for poverty and its avoidance. These include the fulfilment of .basic needs., the .capabilities. to be and to do things of intrinsic worth, and safety from insecurity and vulnerability. This paper asks: to what extent are these different concepts measurable, to what extent are they competing and to what extent complementary, and is it possible for them to be accommodated within an encompassing framework? There are two remarkable gaps in the rapidly growing literature on subjective well-being. First, reflecting the availability of data, there is little research on poor countries. Second, within any country, there is little research on the relationship between well-being and the notion of poverty. This paper attempts to fill these gaps. Any attempt to define poverty involves a value judgement as to what constitutes a good quality of life or a bad one. We argue that an approach which examines the individual.s own perception of well-being is less imperfect, or more quantifiable, or both, as a guide to forming that value judgement than are the other potential approaches. We develop a methodology for using subjective well-being as the criterion for poverty, and illustrate its use by reference to a South African data set containing much socio-economic information on the individual, the household and the community, as well as information on reported well-being. We conclude that it is possible to view subjective well-being as an encompassing concept, which permits us to quantify the relevance and importance of the other approaches and of their component variables. The estimated well-being functions for South Africa contain some variables corresponding to the income approach, some to the basic needs (or physical functioning) approach, some to the relative (or social functioning) approach, and some to the security approach. Thus, our methodology effectively provides weights of the relative importance of these various components of well-being poverty.

Community, Comparisons and Subjective Well-being in a Divided Society

Using a South African data set, the paper poses six questions about the determinants of subjective well-being. Much of the paper is concerned with the role of relative concepts. We find that comparator income - measured as average income of others in the local residential cluster - enters the household’s utility function positively but that income of more distant others (others in the district or province) enters negatively. The ordered probit equations indicate that, as well as comparator groups based on spatial proximity, race-based comparator groups are important in the racially divided South African society. It is also found that relative income is more important to happiness at higher levels of absolute income. Potential explanations of these results, and their implications, are considered. Keywords: Subjective well-being; happiness; comparator groups; altruism; envy; relative deprivation; standard-setting; race; South Africa.

Unemployment in South Africa: The nature of the beast

Unemployment in South Africa is so widespread that it demands an explanation. This paper examines two questions about South African unemployment. Firstly, why do the unemployed not enter the informal sector, as is common in other developing countries? Secondly, why do the unemployed not enter wage employment more readily? The findings provide little support for the idea that unemployed people choose to be unemployed: the unemployed are substantially worse off, and less satisfied with their quality of life, than they would be if informally employed. Various impediments to entry into the informal sector increase open unemployment. The test of the hypothesis that the unemployed have unrealistically high wage aspirations suggests that the commonly reported high reservation wages (relative to predicted wages) are not to be interpreted as reflecting unwillingness to work.

Are searching and non-searching unemployment distinct states when unemployment is high? The case of South Africa

Broadly and narrowly measured unemployment rates differ very markedly in certain countries, and the measure chosen to be the ‘official’ unemployment rate affects perceptions about the extent of the problem. The appropriate measure of the unemployment rate depends on whether jobless persons who say they want work but who are not actively searching should be regarded as part of the labour force. This paper examines whether the non-searching-unemployed state is distinct from the searching-unemployed state in a developing country - South Africa - where the broad unemployment rate and the gap between the broad and narrow rates are both very high. It asks whether lack of job-search among jobless persons claiming to want work is an outcome of tastes or of constraints. It finds evidence in support of adopting the broad definition.

Unemployment and wages in South Africa: A spatial approach

A large amount of recent evidence finds a negative relationship between local unemployment and wages in OECD countries, a relationship christened a ‘wage curve’. This contradicts the conventional model of the labour market in which high unemployment regions have higher wages to compensate for search and other costs. This paper discovers a wage curve in South Africa, a country with several times the typical unemployment rate of OECD countries. The wage curve elasticity in South Africa is similar to that in OECD countries (-0.1) but persists over a much larger range of unemployment rates, implying that unemployment can have a large impact on wages in South Africa. However, this wage flexibility does not extend to union wages which are well insulated from local unemployment conditions. The results here also shed light on the segmentation of the labour market based on labour immobility and on the debate about the appropriate definition of unemployment in South Africa.wages, unemployment, wage curve, South Africa