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Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa

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  • Haroon Bhorat
  • Sumayya Goga
  • Carlene Van Der Westhuizen

    ()
    (Development Policy Research Unit
    Director and Professor)

Abstract

The literature on the union wage gap in South Africa is extensive, spanning a range of datasets and methodologies. There is however little consensus on the appropriate method to correct for the endogeneity of union membership or the size of the union wage gap. Furthermore, there are very few studies on the bargaining council wage premium in South Africa due to lack of data on coverage of employees under these agreements. Our study, using 2005 Labour Force Survey data, firstly reconsiders the union wage gap controlling for both firm-level and job characteristics. When correcting for endogeniety of union status through a two-stage selection model and including firm size, type of employment, and non-wage benefits, we find a much lower union wage premium for African workers in the formal sector than premia reported in some previous studies. Secondly, our study estimates bargaining council wage premia for the private and public sectors. We find that extension procedures are present in both private and public bargaining council systems, but that unions negotiate for additional gains for their members at the plant-level. Furthermore, there is some evidence that unions negotiate for awards for their members in the private sector, irrespective of bargaining council coverage.

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Bibliographic Info

Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 11146.

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Length: 17 pages
Date of creation: Dec 2011
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit, December 2011, pages 1-17
Handle: RePEc:ctw:wpaper:11146

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  1. Richard Freeman, 2008. "Labor Market Institutions Around the World," CEP Discussion Papers dp0844, Centre for Economic Performance, LSE.
  2. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zo� McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
  3. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
  4. Schultz, T.P. & Mwabu, G., 1997. "Labor Unions and the Distribution of Wages and Employment in South Africa," Papers 776, Yale - Economic Growth Center.
  5. Daniela Casale & Dorrit Posel, 2011. "Unions and the Gender Wage Gap in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(1), pages 27-59, January.
  6. Butcher, Kristin F. & Rouse, Cecilia Elena, 2001. "Wage effects of unions and industrial councils in South Africa," Policy Research Working Paper Series 2520, The World Bank.
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Cited by:
  1. Bhorat, Haroon & Naidoo, Karmen & Yu, Derek, 2014. "Trade unions in an emerging economy: The case of South Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Miracle Ntuli & Prudence Kwenda, 2013. "Labour Unions and Wage Inequality Among African Men in South Africa," Working Papers 13159, University of Cape Town, Development Policy Research Unit.
  3. Haroon Bhorat, 2012. "A Nation in Search of Jobs: Six Possible Policy Suggestions for Employment Creation in South Africa," Working Papers 12150, University of Cape Town, Development Policy Research Unit.
  4. Haroon Bhorat & Natasha Mayet, 2012. "Employment Outcomes and Returns to Earnings in Post-Apartheid South Africa," Working Papers 12152, University of Cape Town, Development Policy Research Unit.

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