Making Racial Wage Relations Fair in South Africa: A Focus on the Role of Trade Unions

The aim of this working paper is to highlight the influence of South African trade unions on African and White earnings as well as their role in the reduction of wage inequalities and discrimination between these two groups. The econometric analysis utilises a 1997 microeconomic data set. Findings show firstly that the union wage premium for African male workers lies between 13 percent and 20 percent, depending on the methods used. This value falls in the higher "developing countries" range. In contrast, White workers do not seem to benefit from their unionisation, at least in terms of wages. Secondly, the application of the residual difference method to a non-linear model shows that the racial earnings gap, and more restrictively wage discrimination, originates mainly in the non-union sector. The results indicate that unions play an important role in reducing the white-African wage gap but that discrimination is still a complicated issue in the South African labour market policy.