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Analysing Wage Formation in the South African Labour Market: The Role of Bargaining Councils


  • Haroon Bhorat
  • Carlene van der Westhuizen
  • Sumayya Goga

    () (Development Policy Research Unit
    Director and Professor)


The role of bargaining councils, the central pillar of collective bargaining in South Africa, in the formation of wages is important in the context of high unemployment rates in South Africa. In this study we find that while institutionalised collective bargaining system covered substantially more formal sector workers in 2005 (30 percent) compared to 1995 (15 percent), this still meant that less than a third of the formally employed were covered by bargaining councils. Notwithstanding this, the overall rise in the number of workers covered by bargaining council agreements between 1995 and 2005 was driven almost primarily by the introduction of public sector councils. Thus, bargaining council coverage in the first decade of democracy is characterised by an erosion of coverage within the private sector bargaining council system on the one hand and the rapid rise of this system of bargaining in the public sector. On the other hand the descriptive data and multivariate models show therefore a significant wage premium associated with coverage under public sector councils in 2005, in excess of the large and significant union wage premium. The decline in the bargaining council system in the private sector is accompanied by declining wage premia for formal sector workers covered under private sector bargaining council agreements, with our preferred specification in 2005 indicating no significant private sector bargaining council wage premium.

Suggested Citation

  • Haroon Bhorat & Carlene van der Westhuizen & Sumayya Goga, 2009. "Analysing Wage Formation in the South African Labour Market: The Role of Bargaining Councils," Working Papers 09135, University of Cape Town, Development Policy Research Unit.
  • Handle: RePEc:ctw:wpaper:09135

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    References listed on IDEAS

    1. Murray Leibbrandt & Haroon Bhorat, 1999. "Modelling Vulnerability and Low Earnings in the South African Labour Market," Working Papers 99032, University of Cape Town, Development Policy Research Unit.
    2. Kristin F. Butcher & Cecilia Elena Rouse, 2001. "Wage Effects of Unions and Industrial Councils in South Africa," ILR Review, Cornell University, ILR School, vol. 54(2), pages 349-374, January.
    3. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
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    Cited by:

    1. Susan Hayter & Bradley Weinberg, 2011. "Mind the Gap: Collective Bargaining and Wage Inequality," Chapters,in: The Role of Collective Bargaining in the Global Economy, chapter 6 Edward Elgar Publishing.
    2. 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.
    3. Budlender, Debbie., 2009. "Industrial relations and collective bargaining : trends and developments in South Africa," ILO Working Papers 994332753402676, International Labour Organization.
    4. repec:ilo:ilowps:433275 is not listed on IDEAS
    5. Susan Hayter, 2015. "Unions and collective bargaining," Chapters,in: Labour Markets, Institutions and Inequality, chapter 4, pages 95-122 Edward Elgar Publishing.

    More about this item


    South Africa: bargaining system; bargaining councils; private sector; formal sector;

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics


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