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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

Abstract

Assessments of the impact of minimum wages on labor market outcomes in Africa are relatively rare. In part this is because the available data do not permit adequate treatment of econometric issues that arise in such assessments. This paper, however, attempts to estimate the impact of introducing a minimum wage law in the agriculture sector in South Africa, based on 15 waves of the biannual Labor Force Survey conducted between September 2000 and September 2007. The chosen sample includes six waves before the legislation's effective date (March 2003) and nine afterwards. 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 results suggest a significant employment reduction in agriculture from the minimum wage (and particularly a noticeable move away from employment of part-time workers), an increase in wages on average, and a rise in non-wage benefits compliance. Our analysis also indicates that, firstly, overall average of hours worked fell in the post-law period, suggesting that employers adjusted to some extent on the intensive margin. Secondly, it appears that hours of work increased more in areas where wages were lower in the pre-law period, driven largely by the fall in part-time employment.

Suggested Citation

  • Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2014. "Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1402-1419.
  • Handle: RePEc:oup:ajagec:v:96:y:2014:i:5:p:1402-1419.
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    References listed on IDEAS

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    1. Dinkelman, Taryn & Ranchhod, Vimal, 2012. "Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa," Journal of Development Economics, Elsevier, vol. 99(1), pages 27-45.
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    Cited by:

    1. repec:kap:jbuset:v:149:y:2018:i:1:d:10.1007_s10551-016-3091-0 is not listed on IDEAS
    2. repec:spr:jlabre:v:38:y:2017:i:3:d:10.1007_s12122-017-9241-z is not listed on IDEAS
    3. repec:gam:jlands:v:7:y:2018:i:2:p:40-:d:137767 is not listed on IDEAS
    4. Bhorat, Haroon & Goga, Sumayya & Stanwix, Benjamin, 2014. "Skills-biased labour demand and the pursuit of inclusive growth in South Africa," WIDER Working Paper Series 130, World Institute for Development Economic Research (UNU-WIDER).
    5. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
    6. Haroon Bhorat & Karmen Naidoo & Derek Yu, 2014. "Trade Unions In An Emerging Economy: The Case Of South Africa," Working Papers 201402, University of Cape Town, Development Policy Research Unit.
    7. Haroon Bhorat & Kezia Lilenstein & Morné Oosthuizen & Amy Thornton, 2016. "Vulnerability In Employment: Evidence from South Africa," Working Papers 201604, University of Cape Town, Development Policy Research Unit.
    8. McKay Andy & Pirttilä Jukka & Schimanski Caroline, 2018. "The Elasticity of Formal Work in African Countries," Working Papers 1820, University of Tampere, School of Management, Economics.
    9. Bhorat, Haroon & Cassim, Aalia & Hirsch, Alan, 2014. "Policy co-ordination and growth traps in a middle-income country setting: The case of South Africa," WIDER Working Paper Series 155, World Institute for Development Economic Research (UNU-WIDER).
    10. Belman, Dale. & Wolfson, Paul., 2016. "What does the minimum wage do in developing countries? : A review of studies and methodologies," ILO Working Papers 994893283402676, International Labour Organization.
    11. repec:eee:wdevel:v:102:y:2018:i:c:p:135-157 is not listed on IDEAS
    12. 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.
    13. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," World Bank Research Observer, World Bank Group, vol. 32(1), pages 21-74.
    14. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2015. "Partial minimum wage compliance," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    15. Haroon Bhorat & François Steenkamp & Christopher Rooney & Nomsa Kachingwe & Adrienne Lees, 2016. "Understanding and characterizing the services sector in South Africa," WIDER Working Paper Series 157, World Institute for Development Economic Research (UNU-WIDER).
    16. Haroon Bhorat & Karmen Naidoo & Morné Oosthuizen & Kavisha Pillay, 2015. "Demographic, employment, and wage trends in South Africa," WIDER Working Paper Series 141, World Institute for Development Economic Research (UNU-WIDER).
    17. Haroon Bhorat, 2014. "Compliance with minimum wage laws in developing countries," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-80, August.
    18. repec:spr:ijlaec:v:60:y:2017:i:3:d:10.1007_s41027-018-0109-4 is not listed on IDEAS
    19. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets

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