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Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa

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Listed:
  • Haroon Bhorat
  • Sumayya Goga
  • Carlene Van Der Westhuizen

    (Development Policy Research Unit
    Director and Professor)

Abstract

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.

Suggested Citation

  • Haroon Bhorat & Sumayya Goga & Carlene Van Der Westhuizen, 2011. "Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa," Working Papers 11146, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:11146
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    File URL: http://hdl.handle.net/11427/7290
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    References listed on IDEAS

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    1. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
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    Cited by:

    1. Haroon Bhorat & Karmen Naidoo & Derek Yu, 2014. "Trade Unions in an Emerging Economy: The Case of South Africa," WIDER Working Paper Series wp-2014-055, World Institute for Development Economic Research (UNU-WIDER).
    2. Mohimont, Jolan, 2022. "Welfare effects of business cycles and monetary policies in a small open emerging economy," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    3. John Knight, 2021. "A Tale of Two Countries and Two Stages: South Africa, China and the Lewis Model," South African Journal of Economics, Economic Society of South Africa, vol. 89(2), pages 143-172, June.
    4. Dieter von Fintel, 2016. "Wage flexibility in a high unemployment regime: spatial heterogeneity and the size of local labour markets," Working Papers 09/2016, Stellenbosch University, Department of Economics.
    5. Haroon Bhorat & Safia Khan, 2018. "Structural Change and Patterns of Inequality in the South African Labour Market," Working Papers 201801, University of Cape Town, Development Policy Research Unit.
    6. Jacqueline Mosomi, 2019. "Distributional changes in the gender wage gap in the post-apartheid South African labour market," WIDER Working Paper Series wp-2019-17, World Institute for Development Economic Research (UNU-WIDER).
    7. Dieter von Fintel, 2017. "Institutional wage-setting, labour demand and labour supply: Causal estimates from a South African pseudo-panel," Development Southern Africa, Taylor & Francis Journals, vol. 34(1), pages 1-16, January.
    8. Haroon Bhorat, 2012. "A Nation in Search of Jobs: Six Possible Policy Suggestions for Employment Creation in South Africa," Working Papers 12150, University of Cape Town, Development Policy Research Unit.
    9. Kerr, Andrew & Wittenberg, Martin, 2021. "Union wage premia and wage inequality in South Africa," Economic Modelling, Elsevier, vol. 97(C), pages 255-271.
    10. Deon Filmer & Louise Fox, 2014. "Youth Employment in Sub-Saharan Africa [L’emploi des jeunes en Afrique subsaharienne - Rapport complet]," World Bank Publications - Books, The World Bank Group, number 16608, December.
    11. Miracle Ntuli & Prudence Kwenda, 2013. "Labour Unions and Wage Inequality Among African Men in South Africa," Working Papers 13159, University of Cape Town, Development Policy Research Unit.
    12. Haroon Bhorat & Natasha Mayet, 2012. "Employment Outcomes and Returns to Earnings in Post-Apartheid South Africa," Working Papers 12152, University of Cape Town, Development Policy Research Unit.
    13. Bhorat, Haroon & Naidoo, Karmen & Yu, Derek, 2014. "Trade unions in an emerging economy: The case of South Africa," WIDER Working Paper Series 055, World Institute for Development Economic Research (UNU-WIDER).

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    • A1 - General Economics and Teaching - - General Economics

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