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

Listed author(s):
  • 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.

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Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 09135.

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Length: 98 pages
Date of creation: Jan 2009
Publication status: Published in Working Paper Series by the Development Policy Research Unit, January 2009, pages 1-98
Handle: RePEc:ctw:wpaper:09135
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  1. 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.
  2. 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.
  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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