Analysis of results

Analysis of results

Main findings

Main findings: income

• Income from work accounted for 74% of gross income in 2005/6

• Real per capita income increased in each decile from IES 2000 to IES 2005/6

Main findings: expenditure• 3 largest components in IES 2005/6:

housing transport food and non-alcoholic beverages

• Relatively slow change in spending patterns except for transport (increase since 2000) food and non-alcoholic beverages (decrease since 2000)

Main findings: inequality

• Inequality remains high: average household income was 94 times higher in the top income decile than in the lowest income decile

• 10% of the population received over 50% of the income from work & social grants (2005/6)

• Social security grants play an important role in reducing inequality

Limitations of income andexpenditure surveys

Limitations of income andexpenditure surveys (1)

• Income and expenditure surveys are complex (detailed household information required)

• They are personal and intrude on people’s private lives

• Respondents may fail to report true values of information they regard as sensitive

• Burden on respondents is substantial, leading to fatigue

• Respondents may have poor recollection or records of income

• Concern over tax liability → deliberate under-reporting of income (and expenditure)


• Respondents may not understand income-related questions → poor income information

• Trade-off between changes in methodology / definition / geographic coverage and comparability over time

• For example, IES 2005/6 introduced diary, acquisitions, imputed rent


Household income

Components of household income, IES 2005/6

Rand per household % of gross

Income from work 55 452 74,3

Social insurance and grants 4 557 6,1

Private pensions and annuities 1 953 2,6

Income from capital 865 1,2

Imputed rent 7 081 9,5

Other income 4 679 6,3

Gross 74 589 100,0

Less: income tax and UIF 5 515 7,4

Disposable income 69 074 92,6

Sources of income

• Income from work and social grants provided the most reliable estimates

• Close to national accounts (income from work) and National Treasury (social grants)

• Other items less reliable

% change in mean real per cap income (excl. imputed rent) from IES 2000 to IES 2005/6

• Growth in real per capita income in each decile• Growth was uneven• Above-average growth in deciles 1, 2, 3 and 10• Below-average growth in deciles 4 to 9

Income decile 1 2 3 4 5 6 7 8 9 10 Total

% change from IES 2000 to IES 2005/2006 79 41 36 31 29 26 28 25 26 37 33

Household consumption expenditure

Composition of expenditure

• 3 largest components in IES 2005/6: housing transport food and non-alcoholic beverages

• Note “miscellaneous” in IES 2005/6 56,2% insurance 9,8% financial services 8,6% personal care

Household consumption expenditure (%), IES 2005/6

18,1

14,4

4,6

5,0

14,4

19,9

23,6

0 10 20 30

Other (e.g. furniture, health,communication, education)

Miscellaneous (e.g. insurance, financialservices, personal care)

Recreation and culture

Clothing and footwear

Food and non-alcoholic beverages

Transport

Housing

Percentage of total

Changes in spending patternsfrom IES 2000 to IES 2005/6

• Mortgage & imputed rent excluded for comparability over time

• Broadly similar expenditure patterns with two notable exceptions: Increase in transport Decrease in food & non-alcoholic beverages

Household consumption expenditure (%) excl. mortgage & imputed rent

0 10 20 30

Other (e.g. furniture, health, communication,education)

Miscellaneous (e.g. insurance, financial services,personal care)




Transport

Housing excl. mortgage and imputed rent

Percentage of total

IES 2000IES 2005/2006

Comparisons within IES 2005/6• Role of income in expenditure patterns

E.g. inverse relationship between income and expenditure (as a proportion) on food, clothing E.g. positive relationship between income and expenditure (as a proportion) on transport, recreation

• Role of income clearly evident in comparisons by population group and province

Household consumption expenditure (%)excl. mortgage & imputed rent, by income quintile

0 10 20 30 40






Transport


Percentage of total

Income quintile 1Income quintile 5

Household consumption expenditure (%)excl. mortgage & imputed rent, by population group

0 10 20 30






Transport


Percentage of total

Black AfricanWhite

Black African households’ share of each expenditure category

0 20 40 60 80






Transport


Total

Percentage of each category

IES 2000IES 2005/2006

Low income Middle income High income

Limpopo Eastern Cape

KwaZulu-Natal Gauteng Western

Cape

% % % % %

Food and non-alcoholic beverages 24,8 20,0 19,1 14,0 15,3

Clothing and footwear 7,5 6,4 6,3 5,4 4,2

Transport 16,4 21,5 20,8 24,0 26,1

Recreation and culture 4,0 3,8 5,2 5,7 6,5

Other 47,3 48,3 48,6 50,9 47,9

Total consumption expenditure 100,0 100,0 100,0 100,0 100,0

Household consumption expenditure (%)excl. mortgage & imputed rent, by province

Transport

Rapid growth in vehicle purchases• Growth in real GDP per capita

• Employment growth → need for transport, & ability to finance cars

• Breakdown of purchases by population group:White households Black African, Coloured &

Indian/Asian households

2000 67% 33%

2005/6 60% 40%

100

200

300

400

500

1990 1992 1994 1996 1998 2000 2002 2004 2006

Sal

es (u

nits

, 000

)

19

21

22

24

25

Real G

DP

per cap (R000, 2000 prices)

New car sales (NAAMSA) Real GDP per capita

New car sales (NAAMSA) and real GDP per capita

% of total transport

IES 2000 IES 2005/2006

Purchase of vehicles 38,8 57,6

Operation of personal transport equipment 43,4 25,3

Transport services 17,9 17,1

Total 100,0 100,0

Composition of transport expenditure


28,5 27,4

16,6

30,3 30,1

18,2

0

10

20

30

40

IES 1995 IES 2000 IES 2005/2006

Per

cent

age

Food + non-alcoholic beverages Food + non-alcoholic beverages + restaurants

* IES 2005/2006 based on diary method; IES 1995 and IES 2000 based on recall

* *

Food and non-alc. bev. as a % of household consumption expenditure, excl. mortgage & imputed rent and other uncl.

Assessment of change in food (1)• Inverse relationship between income and food

expenditure as a proportion of total expenditure

• Income↑ → food proportion ↓

• Evidence: countries at different stages of development; analysis by income decile in IES 2005/6 and in previous IESs

Food as a % of household consumption expenditureexcl. mortgage & imputed rent

0

10

20

30

40

50

1 2 3 4 5 6 7 8 9 10

Income decile

Per

cent

age

IES 2000 IES 2005/2006

Assessment of change in food (2)• Different influences between recall and diary

Telescopic effect in recall (+) Respondent fatigue in diary (-)

• Difference between diary and recall consistent with international evidence and Stats SA’s Post Enumeration Survey

• Example of telescopic effect: sugar purchases

40

50

60

70

80

90

100

1 2 3 4 5 6 7 8 9 10 Total

Income decile

% o

f hou

seho

lds

IES 1995 IES 2000 IES 2005/2006

Percentage of households with non-zero sugar expenditure

Assessment of change in food (3)• Relatively consistent breakdown within food

and non-alcoholic beverages compared with previous IESs, for example: Meat ranged between 26,8% (2000) and 28,4% (1995)

Vegetables ranged between 9,3% (1995) and 10,4% (2005/6)

0

5

10

15

20

25

30

Bread andcereals

Meat Fish Dairy Oils andfats

Fruits Vegetables Sugar, jam,choc., etc.

Coffee, tea,cocoa

Non-alc.bev.

Per

cent

age

IES 1995 IES 2000 IES 2005/2006

Composition of food and non-alcoholic beverages

Inequality

Measuring inequality (1)

• Inequality remains high

• Average household income was 94 times higher in the top income decile than in the lowest income decile

• 10% of the population received over 50% of the income from work & social grants (2005/6)

0,2 1,2 2,2 2,9 3,5 4,7 6,410,3

17,8

51,0

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10

Per capita income deciles

Sha

re o

f inc

ome

(%)

Distribution of income (work and social grants)


• Inequality among population groups:

% of population % of income (work & social grants)

Black African 79,4 41,2

Coloured 8,8 8,6

Indian/Asian 2,5 4,8

White 9,2 45,3

Total 100 100


• Inequality reflected in tax incidence 30% of households accounted for 95% of tax

• Social security grants play an important role in reducing inequality Deciles 1 to 4 derived over half their income from grants

0

15

30

45

60

75

1 2 3 4 5 6 7 8 9 10

Income decile

Sha

re p

aid

(% o

f tot

al)

by e

ach

deci

le

0

2

4

6

8

10Tax rate of each decile (%

) .

% share of taxes and contributions Mean tax rate

Incidence of income tax and mean effective tax rate

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10

Income decile

Remuneration Social security grants

Contribution of income from work & social grantsto income from these two sources

Gini coefficient estimates and the impact of taxation and social grants

0,68

0,70

0,72

0,74

0,76

0,78

0,80

0,82

Income from work Add social grants Less tax

Estimate; vertical line indicates 95% confidence interval

Gini coefficient (total disposable income) by population group

Black African 0,63

Coloured 0,59

Indian / Asian 0,57

White 0,56

In summary …

• Increase in real per capita income in all deciles (2000 to 2005/6)

• Increase in transport and decrease in food & non-alcoholic beverages as proportions of total consumption (2000 to 2005/6)

• High degree of inequality, but reduced through social grants

Questions and discussion

Documents

Analysis of results