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Wage effects of unions and industrial councils in South Africa

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  • Butcher, Kristin F.
  • Rouse, Cecilia Elena

Abstract

In South Africa, unions which played a crucial in the country's transition from apartheid, are coming under fire. Some argue that a high union wage premium, and the industrial council system are important causes of inflexibility in South Africa's labor market. The authors analyze unions'direct effect on workers'wages (including the time-honored question about whether the union wage gap is real, or reflects the fact that workers who are members of unions, differ from those who are not), and ask whether there is evidence that industrial council agreements force affected employers to pay union wages for non-union workers. Theyestimate that among Africans, union members earn about twenty percent more than non-members, while among whites, union workers earn ten percent more than non-union workers. They find that African non-union workers, who are covered by industrial council agreements, receive a premium of six to 10 percent; the premium is positive, but not statistically significant for whites. In addition, the union gap is smaller inside the industrial council system, than outside the system for Africans, implying that the total union premium for union members covered by an industrial council agreement, is similar to the union premium outside the industrial council system. Among Africans, the industrial council, and union wage gaps, are greatest among low-wage workers. To increase employment, policies in South Africa should focus on increasing competition among employers within sectors, rather than increasing competition among workers, by trying to reduce union power.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2520.

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Date of creation: 31 Jan 2001
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Handle: RePEc:wbk:wbrwps:2520

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Keywords: Health Monitoring&Evaluation; Labor Management and Relations; Environmental Economics&Policies; Labor Standards; Geographical Information Systems;

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  1. Stephan Klasen & Ingrid Woolard, 1999. "Levels, trends and consistency of employment and unemployment figures in South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 16(1), pages 3-35.
  2. Moll, Peter, 1996. "Compulsory Centralization of Collective Bargaining in South Africa," American Economic Review, American Economic Association, vol. 86(2), pages 326-29, May.
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. Daniel Sullivan, 1989. "Monopsony Power in the Market for Nurses," NBER Working Papers 3031, National Bureau of Economic Research, Inc.
  5. 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.
  6. T. Paul Schultz & Germano Mwabu, 1998. "Labor unions and the distribution of wages and employment in South Africa," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(4), pages 680-703, July.
  7. Rosen, Sherwin, 1969. "Trade Union Power, Threat Effects and the Extent of Organization," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 36(106), pages 185-96, April.
  8. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
  9. Harry C. Katz, 1993. "The decentralization of collective bargaining: A literature review and comparative analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(1), pages 3-22, October.
  10. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, Econometric Society, vol. 45(1), pages 1-22, January.
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  1. To understand earnings in Africa, we need to look past the formal/informal divide
    by Andrew Kerr in The CSAE Blog on 2012-06-01 11:47:25
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