Elderly South Africans forced to work
Once the age of retirement is reached most South Africans become entitled to a social pension and are excluded from labour force statistics. At the end of 2004 the pension was R740 per month, which is almost half the average household income and more than twice the median per capita monthly household income of most South Africans. However, despite access to this benefit a significant proportion of the elderly continue to work or want to work.
Of the approximate 2.6 million pension-aged individuals in South Africa, 1.8 million are female and 800 000 are male. The main reason for the gender discrepancy is that men only qualify for the pension benefit at age 65 whereas women qualify at 60. According to statistics 211 426 (13%) of female pensioners are active in the labour market compared to 161 430 (21%) of males. As the figures indicate, a relatively large percentage of pension-age South Africans continues to work despite the easily accessible social pension.
There are two factors that appear to explain part of this phenomenon. The first is the number of working-age individuals that cant get jobs and rely on their elderly parents for support. The second is the number of adults that are ill or have died, many of AIDS. As a result, South Africa has a relatively unique household composition pattern. There is an increasing number of three-generation and skip-generation households. The former come about for financial reasons it is simply cheaper to live with your extended family, the latter because grandparents are taking care of the children of deceased parents.
As a result of the inevitable interdependence between household members, the unemployment or illness of a working-age member will compel one or more of the elderly members to go out and work in order to maintain the level of household income. Gary Becker, the Nobel Laureate in economics, described in the 1960s the interaction between household members and their decisions to participate in the labour force. He noted that where there are other members in the household, labour force participation decisions are made interdependently amongst household members.
UNAIDS (2002a) estimated that at the end of 2001 there were 4 700 000 South African adults between the ages of 15-49 living with HIV/AIDS (20.1 percent of the adult population), while 350 000 adults had already died. The number of AIDS orphans is therefore increasing dramatically. Reports show that there are currently 662 000 children below the age of 15 who have lost one or both parents to AIDS, and this figure is expected to rise to 1.7 million by the year 2010.
According to the World Health Organisation, the main problems faced by older people caring for HIV-infected adults and/or orphans is the loss of economic support, loss of remittances from their sick/dead adult children, lack of access to basic needs, limited access to health care services, financial hardship leading to inability to pay for medical or school fees, stigmatisation, and physical and emotional stress. In order to cope with such difficulties elderly individuals have no other option but to either continue working or to start working again in order to support their sick children and/or grandchildren.
Stats SA estimates that approximately 4.5 million (28 per cent) of the potential South African workforce (age 15 to 65 years) is unemployed but this number rises to 8.4 million (42 per cent) if you include discouraged individuals who believe that there are no jobs for them. Artificial barriers such as minimum wages and laws providing high levels of job security to the employed prevent the labour market from functioning. Market forces must be allowed to determine wages and establish conditions of employment in order to reduce unemployment. If the necessary changes are made that will allow the young and able-bodied to get jobs, many of the elderly South Africans that are currently working will be able to enjoy a well-earned rest.
Author: Jasson Urbach is an economic researcher at the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the authors and are not necessarily shared by the members of the Free Market Foundation.
FMF Feature Article/11 January 2005
Publish date: 11 January 2005
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.