Just Published: Can cash transfers aid labour market recovery? Evidence from South Africa’s special COVID-19 grant

23 Jun 2021 - 12:00

The DPRU continues to participate in a variety of research projects aiming to provide empirical evidence on key socioeconomic outcomes during the COVID-19 pandemic and national lockdown in South Africa, specifically with respect to the labour market, workplace transmission risk, and social assistance.

Our latest working paper, "Can cash transfers aid labour market recovery? Evidence from South Africa’s special COVID-19 grant", authored by Prof. Haroon Bhorat (DPRU Director) and Tim Köhler (Junior Researcher and PhD candidate), provides a quantitative, descriptive analysis on COVID-19 grant receipt as well as causal estimates of the receipt of the grant on labour market participation by adopting a quasi-experimental econometric approach.

We found that the COVID-19 grant brought millions of the previously unreached – mostly non-employed, young men – into the system, and was relatively well-targeted to the unemployed and informally employed. In particular, in a multivariate context, we find that the chronic unemployed were more than 50% more likely to receive the grant.

Also, application for and receipt of the COVID-19 grant has been relatively pro-poor. Conditional on applying, 23% of adults in the poorest 10% of households were successful, in contrast to 0.71% in the richest decile. Nearly all individuals in the richest decile (97%) never even applied, in contrast to 40% of those in the poorest decile.

The COVID-19 grant played a notable role in reducing poverty, particularly amongst the poorest individuals, and inequality. In the absence of the grant, poverty would have been 2 percentage points higher, and household income inequality 1.3% - 6.3% higher, depending on the inequality measure.

The labour market effects of the COVID-19 grant may differ from existing grants because it is the first in SA to explicitly target the unemployed. However, our causal estimates suggest that the grant played a significant role in aiding labour market recovery by combatting inactivity and enabling participation. Specifically, we find that receipt of the grant increased the probability of job search by more than 25 percentage points. This is contrary to the common concern that grant programs may discourage work.

Read DPRU WP202108 in full here.