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The Impact of Sectoral Minimum Wage Laws on Employment, Wages and Hours of Work in South Africa

  • Haroon Bhorat
  • Ravi Kanbur
  • Natasha Mayet

    ()

    (Development Policy Research Unit
    Director and Professor)

This paper attempts to investigate the impact of sectoral wage laws in South Africa. Specifically, we examine the impact of minimum wage laws promulgated in the Retail, Domestic work, Forestry, Security, and Taxi sectors using 15 waves of biannual Labour Force Survey data for the 2000-2007 period. Using a quasi-experimental approach, we apply two alternative specifications of a difference-in-differences model to estimate the impact of multiple minimum wage laws in South Africa on employment, wages, and hours of work. In order to assess whether the changes experienced by workers in the sectors analysed were unique to those sectors, a unique control group is identified for each sector.We find some evidence of a significant increase in real hourly wages in the post-law period in four of the five sectors examined. Our results also suggest that whilst there was no significant impact of the laws at the extensive margin, there was some evidence of an adjustment at the intensive margin in certain sectors. We also find that in three of the five sectors, increases in real hourly wages were sufficient to outweigh intensive margin adjustments so that workers in these sectors experienced an improvement in real monthly income as a result of the law.

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Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 12154.

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Length: 27 pages
Date of creation: Nov 2012
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit, November 2012, pages 1-27
Handle: RePEc:ctw:wpaper:12154
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  1. Bhorat, Haroon & Kanbur, Ravi & Mayet, Natasha, 2011. "Minimum Wage Violation In South Africa," Working Papers 126534, Cornell University, Department of Applied Economics and Management.
  2. Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank.
  3. 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.
  4. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  5. Tom Hertz, 2005. "The Effect of Minimum Wages on the Employment and Earnings of South Africa’s Domestic Service Workers," Working Papers 05099, University of Cape Town, Development Policy Research Unit.
  6. Stephen Machin & Alan Manning, 1994. "The effects of minimum wages on wage dispersion and employment: Evidence from the U.K. Wages Councils," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
  7. Bhorat, Haroon & Kanbur, Ravi & Stanwix, Benjamin, 2013. "Estimating the Impact of Minimum Wages on Employment, Wages and Non-Wage Benefits: The Case of Agriculture in South Africa," Working Papers 180095, Cornell University, Department of Applied Economics and Management.
  8. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2011. "Estimating the Causal Effect of Enforcement on Minimum Wage Compliance : The Case of South Africa," Working Papers 11145, University of Cape Town, Development Policy Research Unit.
  9. Haroon Bhorat, 2000. "Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers," Working Papers 00041, University of Cape Town, Development Policy Research Unit.
  10. David Card, 1992. "Do minimum wages reduce employment? A case study of California, 1987û1989," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 38-54, October.
  11. Bhorat, Haroon & Kanbur, Ravi & Mayet, Natasha, 2011. "A Note On Measuring The Depth Of Minimum Wage Violation," Working Papers 126533, Cornell University, Department of Applied Economics and Management.
  12. Conradie, Beatrice, 2005. "Wages and wage elasticities for wine and table grapes in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 44(1), March.
  13. Nicola Branson, 2009. "Re-weighting the OHS and LFS National household Survey Data to create a consistent series over time: A Cross Entropy Estimation Approach," SALDRU Working Papers 38, Southern Africa Labour and Development Research Unit, University of Cape Town.
  14. Murray, Justin & van Walbeek, Corne, 2007. "Impact of the Sectoral Determination for Farm Workers on the South African Sugar Industry: Case Study of the KwaZulu-Natal North and South Coasts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(1), March.
  15. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
  16. David S. Lee, 1999. "WAGE INEQUALITY IN THE UNITED STATES DURING THE 1980s: RISING DISPERSION OR FALLING MINIMUM WAGE?," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 977-1023, August.
  17. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
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