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Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

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  • Taryn Dinkelman

    (Princeton University)

  • Vimal Ranchhod

    (University of Cape Town)

Abstract

What happens when a previously uncovered labor market is regulated? We exploit the introduction of a minimum wage in South Africa and variation in the intensity of this law to identify increases in wages and formal contract coverage, and no significant effects on employment on the intensive or extensive margins for domestic workers. These large, partial responses to the law are somewhat surprising, given the lack of monitoring and enforcement in this informal sector. We interpret these changes as evidence that external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.

Suggested Citation

  • Taryn Dinkelman & Vimal Ranchhod, 2010. "Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa," Working Papers 1254, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    • Handle: RePEc:pri:rpdevs:dinkelman_ranchhod_minwages_0710.pdf
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    More about this item

    Keywords

    Minimum wage; informal sector; Africa;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General

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