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Institutional Wage Effects: Revisiting Union And Bargaining Council Wage Premia In South Africa

  • HAROON BHORAT
  • SUMAYYA GOGA
  • CARLENE VAN DER WESTHUIZEN

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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Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 80 (2012)
Issue (Month): 3 (09)
Pages: 400-414

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Handle: RePEc:bla:sajeco:v:80:y:2012:i:3:p:400-414
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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  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. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
  7. T. Paul Schultz & Germano Mwabu, 1998. "Labor Unions and the Distribution of Wages and Employment in South Africa," ILR Review, Cornell University, ILR School, vol. 51(4), pages 680-703, July.
  8. P. G. Moll, 1993. "Black South African Unions: Relative Wage Effects in International Perspective," ILR Review, Cornell University, ILR School, vol. 46(2), pages 245-261, January.
  9. Shane Godfrey & Johann Maree & Jan Theron, 2006. "Conditions of Employment and Small Business: Coverage, Compliance and Exemptions," Working Papers 06106, University of Cape Town, Development Policy Research Unit.
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