Tuesday, November 13, 2012

A crisis of perceptions.

The S.A. national census shows again how we deflect discourse from real core issues.

Don’t you sometimes wish that there was a grand illusionist out there that overnight could change the colour of us all into a single one – say green? Illusionists trick us with a sleight of hand, distracting our attention from reality by drawing it to something else.

This image came to mind with the provisional release of the 2011 census results; so did Disraeli’s famous remark “lies, damn lies and statistics.” I’m not a statistician, having dropped the subject in my first year of tertiary study. So this may disqualify me from being disdainful about their use, and perhaps even a tad hypocritical because I use them often enough in supporting my own drawing bias. What follows therefore, carries something of a disclaimer and is more of a question to those who may understand the stats differently.

But that’s the point: statistics are often suspect in their gathering, processing and extrapolation (for example, there’s a full 6% difference in the unemployment rate reflected by STAT SA’s Quarterly Labour Force Survey and the 29.8% shown by the population census by the same agency!). But the real lies get told both in their selection and then in their interpretation. Add a racial slant to that mix and we literally get blinded by colour.

The two main crisis issues reflected in the 2011 census remain unemployment and a lack of skills and training. They are clearly strongly related.

So here’s the real question: would either of these problems disappear if we removed any racial inference? I cannot see how. I do not want to understate the importance of race and of addressing the past in very many of our social problems. But attention to the race issue, including the trans-generational “legacy” argument is often little more than a tragic sleight of hand, whether deliberate or unintended, which becomes a discourse stopper. Ultimately all of the headline grabbing comment on most issues can be linked straight back to the two mentioned above. And the other issues are not the cause but rather an effect of those two.

Let’s take the statistic that shows that “white household incomes are 6 times that of black households.” That immediately led to one headline that read: “Census debunks myth about white men”, and another that read “Census reveals stark equality lies.”

But the same statistics could have been used to say: “Average income for black households has risen by 169% in the past decade, and for whites by only 88%.” Or better still: “average income of poorer households has risen more than 2 ½ times but for wealthier households by just over ¾.” (Of course, mathematically these respective increases will not necessarily eliminate the imbalance for years to come.)

There’s even further context that economist Mike Schussler brought to my attention:

“Africans have a median age of 21 while Whites have a median age of 38. 14% of White South Africans work for themselves while only 5% of Africans do so. The typical education for whites is post-matric and for African it is pre-matric (4 ½ times more whites have a post school qualification than African South Africans.)”

The 6-to-1 race income ratio creates some other odd assumptions, one by a popular political analyst who questioned white employment equity concerns because the “figures show that whites are 6 times more likely to get employment than blacks.” This logic is blatantly flawed. Employment equity is a barrier to new white job seekers and often to promotion. Sure, there may be some form of covert racial and “old boy” nepotism, particularly at the executive level, but not nearly enough to counter legal requirements for employment equity where incumbent qualifications are the same. Average white income levels are sustained by skills and experience, as well as self-employment and emigration (the white population is now 7% smaller than it was a decade ago and is just below 9% of the total population).

Just as bizarre was a conclusion from an economic think tank (whose name escapes me now) that income disparities were responsible for unemployment. That one I simply cannot fathom. Certainly unemployment is the biggest single contributor to inequality, but to argue the reverse is trying to connect too many unrelated dots. Even if it were remotely true, the implication that we could solve unemployment overnight by somehow miraculously and savagely cutting top incomes goes beyond all rational thinking. It would literally turn the economy on its head.

The whole debate around inequality is rife with misconceptions and ill-founded assumptions.

There are huge differences between wage disparities, income disparities and wealth disparities. The first is simply the difference between low and high remuneration in employment. The second is mostly measured at household levels where unemployed dependents are added. So each of the 4 ½ million unemployed people with zero incomes gets added to the lower end of the pool, massively diluting that income. And the third relates to possession of assets such as property.

In addition the data itself is skewed. The Quarterly Labour Force survey and Income and Expenditure survey are exactly that –surveys of households where the information is obtained in a “Q&A” and “tick-a-box” format. Schussler believes a lot of this information is contaminated by people not understanding the difference between gross income, net income, and take-home pay. They most likely give take-home pay which will be net of deductions for tax, pensions, medical aid, garnishing orders, etc. Ironically, at the higher income level, that particular question is more likely to be better understood, and the responses could further inflate the disparity.

And while we are about it, we might as well give Gini a fat slap on the wrist. As far as I can make out the Gini co-efficient uses the same survey material in compiling its income disparity measurement, suffering from the same contamination. Yet in supporting wage demands, Trade Union leaders use the “worst in the world” 0.67 measurement as proof of wage inequality and not broad income inequality. That’s either very misguided or mischievous.

In short excessive inequality is largely a function of unemployment which in turn in South Africa in particular, is largely a function of lack of skills and training.

Many of my columns have lamented inequality and income disparities, and I must confess that they may have been influenced to some extent by my own oversight of the fuller context. But this does not detract from the key argument that in the workplace itself, market remuneration dysfunction exists at both the executive level through dubious reward criteria, and at the lower level through collective extortion.

Both are adding to inequality by inflating pay at the top and discouraging costly and troublesome employment at the bottom. While outrageous executive pay may not have as big an impact on inequality in real terms as unemployment does, its impact on perceptions is many times worse. That alone means we cannot ignore it.

Inequality is a serious and highly dangerous social mood influencing time bomb. We owe it to each other to change perilously misinformed perceptions that lock many into poverty thinking, unrealistic expectations and facile solutions. We certainly cannot afford to inflame them. We can start by avoiding needless racial interpretations and sharing credible and understandable information in the workplace.

Perhaps it is time for us all to go green…but then there’s too much envy around as it is.

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