One of the objections to the introduction of a Basic Income Grant is the notion that the grant would increase "dependency". This is a complex argument that encompasses a number of distinct concerns, which must be disentangled and assessed separately.

A Recipe for Self-Reliance

Some critics of a BIG have expressed concern that the grant will make people reliant on others, rather than on their own resources. Of course, we all rely on others to some extent. Those who are employed rely on their employers for their income and security. It is poverty - lack of access to income and assets - that makes people more reliant on others. A Basic Income Grant would decrease dependence by providing poor households with a small, but reliable, income.

Currently, destitute households typically rely on assistance from family, friends and neighbours who are frequently poor themselves. In a society marked by massive wealth and enormous inequality, it would make more sense to mobilise the resources of the very rich to ensure the survival and dignity of the very poor. A BIG, financed via progressive tax rates, would redistribute wealth and diminish this form of dependence. To the extent that the obligation to support poorer relatives and friends imposes an effective "tax" on the working poor, the BIG would have a developmental effect, enabling working families to invest more of their incomes in nutrition, education and health care - with corresponding productivity gains.

A Basic Income Grant would also allow the poor to be self-reliant. Research demonstrates that success in job seeking is strongly correlated with income: as income rises, people tend to look for work more vigorously and are more likely to find it. Even a small, stable income enables poor households to take the sort of risks inherent in job seeking and entrepreneurship.

Does a BIG Pose a "Moral Hazard"?

Concerns about dependency are often premised on the belief that a BIG will encourage immoral or economically undesirable behaviour. This objection takes several forms.

Laziness

Some people fear that a grant will make people lazy. Borrowing criticisms of welfare programmes in the industrial North, they say that a BIG would remove any incentive to work or to contribute to the economy.

However, there are two crucial differences between a BIG and European-style "dole" schemes. First, welfare programmes in rich countries give people comparatively large grants, allowing beneficiaries to maintain an acceptable, if not comfortable, standard of living without working.¹ Second, dole schemes are usually means-tested. This means that applicants can only receive benefits if their income from other sources falls below a certain amount. This creates a perverse incentive: finding a job means that you lose your benefits. A dole also invites fraud by giving beneficiaries a strong incentive to conceal from the state any additional income they manage to earn.

In contrast, a BIG of R100 a month would prevent people from falling into destitution, but it would not be sufficient to discourage people from looking for ways to earn additional income. Furthermore, because the BIG would be universal, no one would decline work to avoid an abrupt loss of the grant.

Loss of dignity

Others believe that grants rob people of the dignity that comes from working for one's living. In this view, grants should only be available to the "deserving" poor: the very young, the very old, those with special needs and those who are temporarily out work. Everyone else should "lift themselves up by their own bootstraps".

Implicit in this argument is the assumption that grant recipients will choose not to work. That is unlikely, for reasons discussed above. Furthermore, this logic requires that jobs be available for anyone who wants one (as is largely true in the industrialised nations which have popularised this critique).

Like most developing nations, however, South Africa cannot promise anything near full employment. In September 2002, the official unemployment rate stood at close to 30% and the "expanded" unemployment rate, which includes discouraged job seekers who have given up trying to find work, was nearly 40%. The formal sector has shed more jobs over the last five years than have been created. In addition, every year sees a fresh intake of school leavers and graduates who enter the market looking for work. Even if some of the slack has been taken up by informal sector employment, the available evidence suggests that such jobs are considerably lower-paid, less secure and currently do not qualify those who hold them from accessing social insurance. They are thus not adequate substitutes for formal employment. The Government's Committee of Inquiry concluded that South Africa faces a "labour surplus economy with a high skills' deficit at the lower end".²

In short, South Africa is unlikely to be able to offer jobs to all work seekers for some time to come. It is at best nonsensical, and at worst dishonest, to construct a social security system around the premise that all (or even the overwhelming majority of) adults can find work. To do so is to condemn a significant minority to the indignity of perpetual poverty.

Irresponsible use

Closely linked to concerns about laziness and merit, are fears that people will use a BIG irresponsibly - squandering it on alcohol, cigarettes and gambling - or that women will have unwanted children in order to collect more grant money.³ Contrary to the anecdotal evidence reported in the media, research indicates that more than 90 per cent of the money spent by poor households goes to food, education and transportation. A study conducted by EPRI earlier this year of a small sample in Mount Frere found that households receiving a grant are also more likely to accumulate assets - long seen as an important factor in escaping poverty.⁴

Income and responsibility are not directly related; some people use their resources irresponsibly, regardless of their level of income. There will inevitably be some abuse of grants, just as there is some abuse of existing grants, but this will not be the norm. While sensational stories of misuse will continue to sell newspapers, this should not be a rationale for withholding a BIG.

Development and Sustainability

In short, concerns about dependency tend to overlook the developmental impact of the BIG. A BIG would put more money into the pockets of the poor, stimulating consumer spending. Since poorer households tend to buy goods produced by more labour-intensive domestic industries, such spending would stimulate both local economic activity and job creation. Expanding economic activity will generate additional revenue. As incomes increase, more households will be eligible - and able - to pay income tax; increased commercial activity will translate into additional income from company and value-added taxes. The net cost of the grant is therefore likely to diminish over time. In addition, the grant promises to reduce state costs by enhancing the efficiency of public spending in other areas, such as health and education. So not only is a BIG affordable now, but it will also become increasingly affordable in the future.

¹ In the United Kingdom, for example, a single person over the age of 25 can claim over £200 (R3100) per month on the dole.

² Report of the Committee of Inquiry into a Comprehensive Social Security System, p. 17.

³ Recently, the media have highlighted a handful of incidents where young women receiving the Child Support Grant have apparently not used it for the purposes it was intended. Often these accounts fail to contextualise the incidents, with the result that they simply reinforce prejudices about the irresponsibility of women, and poor women in particular.

⁴ EPRI, "Social Security Transfers, Poverty and Chronic Illness in the Eastern Cape", 21 May 2002, 51.