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Estimating the Impact of Minimum Wages on Employment, Wages and Non-wage Benefits: The Case of Agriculture in South Africa

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  • Haroon Bhorat
  • Ravi Kanbur
  • Benjamin Stanwix

    ()
    (Development Policy Research Unit
    Director and Professor)

Abstract

Assessments of the impact of minimum wages on labour market outcomes in Africa are relatively rare. In part this is because the data available do not permit adequate treatment of econometric issues that arise in such an assessment. This paper attempts to estimate the impact of the introduction of a minimum wage law within the Agriculture sector in South Africa, based on 15 waves of the biannual Labour Force Survey (LFS), starting in September 2000 and ending in September 2007. The chosen sample includes six waves before the legislations effective date (March 2003) and nine afterwards. All 15 waves are pooled and treated as repeated cross sections over time. In order to assess whether the changes experienced by farm workers are unique, we identify a control group that has similar characteristics to the treatment group. Our econometric approach involves using two alternative specifications of a difference-in-differences model. We test whether employers reduced employment, and whether they responded at the intensive margin by reducing hours of work. The law also required non-wage benefits to be implemented, and we track the response here in the form of one such provision, namely that of a written contract. The results suggest a significant reduction in employment in Agriculture from the minimum wage, an increase in wages on average, no significant change in hours worked and a sharp rise in non-wage compliance. Acknowledgements: The research, from which this paper emanates, was funded by the International Development Research Centre (IDRC).

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Bibliographic Info

Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 12149.

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Length: 20 pages
Date of creation: Jul 2012
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit, July 2012, pages 1-20
Handle: RePEc:ctw:wpaper:12149

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Keywords: Minimum Wage; Agriculture; South Africa; Wage; Employment; Hours of Work;

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References

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  1. Neumark, David & Wascher, William, 2007. "Minimum Wages and Employment," IZA Discussion Papers 2570, Institute for the Study of Labor (IZA).
  2. Sara Lemos, 2007. "Minimum wage effects across the private and public sectors in Brazil," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 700-720.
  3. Andalón, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute for the Study of Labor (IZA).
  4. Nicola Branson, 2009. "Re-weighting the OHS and LFS National household Survey Data to create a consistent series over time: A Cross Entropy Estimation Approach," SALDRU Working Papers 38, Southern Africa Labour and Development Research Unit, University of Cape Town.
  5. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
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Cited by:
  1. Betcherman, Gordon, 2014. "Labor market regulations : what do we know about their impacts in developing countries ?," Policy Research Working Paper Series 6819, The World Bank.
  2. 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).
  3. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2012. "The Impact of Sectoral Minimum Wage Laws on Employment, Wages and Hours of Work in South Africa," Working Papers 12154, University of Cape Town, Development Policy Research Unit.

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