The Southern Africa Labor Development Research Unit at the University of Cape Town was commissioned by the Office of the President to use its knowledge of program evaluation and South African social assistance policy to answer this question.
We assessed spending related to the largest element of the program, the Basic Education Employment Initiative.
We find that the program is likely to support broader economic activity and that these effects partially persist after the program ends.
Participants buy goods that are produced to some extent in local value chains and employ local workers, rather than imported goods. Spending on programs does not just “disappear” but is recirculated into the South African economy.
the study
The Basic Education Employment Initiative has employed approximately 245,000 young people in each phase to support schools across the country. Employment periods vary by stage.
It's been 8 months recently. Participants have full-time jobs and are paid the national minimum wage of approximately R4,000 (US$209) per month.
The program completed its fourth phase in 2023. Since its launch in December 2020, it has employed over 850,000 young people, making it the largest youth employment program in South Africa's history.
Read: The double-edged sword of minimum wage
Our study focused on Phases 2 and 3 of the program from November 2021 to August 2022.
First, we looked at how the program affected participants' spending patterns. We then estimated what kind of economic activity this spending supported.
Our initial evidence comes from a WhatsApp survey of 31,250 participants conducted in collaboration with Harambee Youth Employment Accelerator, a non-profit organization that supports the program in partnership with the Ministry of Basic Education. Harambee holds contact details for most participants in Phase 2 and Phase 3 and has received permission for their records to be used in program evaluation.
Unfortunately, the response rate for the survey was low. However, it was shown that participants spent most of their cash on groceries (about 50%), transportation, and rent.
Most of their income went toward necessities, much of it from local shops.
However, our main evidence is based on information provided by large grocery retailers. This retailer has granted us limited access to completely anonymized sales records from its loyalty rewards program.
By partnering with Omnisient, a privacy-preserving data collaboration platform, we were able to see who in our data is and isn't participating in our programs, while maintaining individuals' anonymity. In this paper, we explain how this was done without revealing or sharing any personally identifying information. The data linkage partnership underwent a rigorous legal process and received research ethics approval from the University of Cape Town.
Using this data, we found that participants' average spending at retail stores increased from R327 (US$17) per month before the program began to R437 (US$23.50) during the program.
Using a statistical analysis technique called difference-in-differences, participants' spending jumped 15% during the program when compared to a control sample of other customers who shopped at the same locations and types of stores as participants. I found out that I did it.
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After the program ended, participants' spending remained 4% higher than baseline.
This could be due to participants saving money during the program or because it was easier for participants to find a job after the program ended.
However, this total spending increase hides considerable diversity, as shown in the following table. In the largest spending categories, participants' spending increased by 16% (grocery, refrigerated and frozen perishables) and 20% (toiletries), but in several smaller categories, the percentage increase was lower (from a lower base). Much higher.
For example, spending on household appliances and small appliances increased by 51%, and spending on kitchenware increased by 40%. In general, grocery spending growth rates were low. This was not surprising since these necessities already made up a large portion of participants' budgets before the program began.
This is because food accounts for more than 80% of retail spending and is therefore overestimated, so a 15% increase in retail spending is more than the program increased spending for all participants. This means that it is likely to be underestimated.
Another reason why the 15% increase is probably an underestimate is because we can only see each individual's purchases, not the rest of the household's purchases. However, some participants were likely shopping on behalf of their families prior to the program, and someone else took over shopping responsibilities during the program using income from the Basic Education Employment Initiative.
income effect
So what can we say about who gets the revenue from this increased spending? Seeing firsthand how spending from this program flows into the economy and how businesses respond to this increased revenue. This part of the paper is exploratory and speculative.
Instead, use behind-the-scenes calculations to scale up spending, using input-output data from Stats SA to derive assumptions about which industries produce which types of goods, and using other company data to It is necessary to check the production status of the company. Wages and profits typically increase as sales increase. Our paper details our methods, assumptions, and limitations.
With these caveats in mind, the program's implied direct impact on retailer sales is approximately R8 million (US$417,500) per month.
Directly, the retailer's employees' wage bill could have increased by approximately R1 million (US$52,188) per month.
Indirectly, the retailer's increased sales likely increased demand from the retailer's suppliers, which in turn increased demand from those suppliers' suppliers, resulting in an additional $1.7 million per month in non-retailer employment and wages. We estimate that the amount increased by Rand (US$88,734).
What about spending by non-retail participants? By scaling up retailer-specific results, the program as a whole would generate approximately R38 million (US$2 million) of additional value to the national economy each month, which is This is estimated to be worth R19 million (US$991,473) in additional jobs and wages. R13 million (US$678,376) per month was earmarked for employment in local communities.
what's next
The main beneficiaries of the Basic Education Employment Initiative Program are young people and school students who are directly employed by the program. However, money is not “thrown away”. One person's expenses become another person's income.
Participants then purchase locally produced goods using local workers.
When assessing the costs and benefits of the program and similar programs such as social grants, these “additional” economic benefits should be included as part of the calculation.
PhD Candidate in Economics, University of Massachusetts Amherst, and Research Fellow in Economics, London School of Economics and Political Science.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
