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Citation Information

Type Working Paper - DPRU Working Paper 12/149
Title Estimating the impact of minimum wages on employment, wages and nonwage benefits: The case of agriculture in South Africa
Author(s)
Issue 12/149
Publication (Day/Month/Year) 2012
Page numbers 1-23
URL http://www.dpru.uct.ac.za/sites/default/files/image_tool/images/36/DPRU WP12-149.pdf
Abstract
Assessments of the impact of minimum wages on labor market outcomes in Africa are relatively rare. In part this is because the data available do not permit adequate treatment of econometric issues that arise in such an assessment. This paper attempts to estimate the impact of the introduction of a minimum wage law within the Agriculture sector in South Africa, based on 15 waves of the biannual Labour Force Survey (LFS), starting in September 2000 and ending in September 2007. The chosen sample includes six waves before the legislation’s effective date (March 2003) and nine afterwards. All 15 waves are pooled and treated as repeated cross sections over time. In order to assess whether the changes experienced by farm workers are unique, we identify a control group that has similar characteristics to the treatment group. Our econometric approach involves using two alternative specifications of a difference-in-differences model. We test whether employers reduced employment, and whether they responded at the intensive margin by reducing hours of work. The law also required non-wage benefits to be introduced, and we track the response here in the form of one such provision, namely that of a written contract. The results suggest a significant employment reduction in agriculture from the minimum wage – and in particular a noticeable move away from employment of part-time workers –, an increase in wages on average, and a rise in non-wage compliance. Our analysis also indicates that average hours of work adjusted in two ways: firstly, the overall average of hours worked fell in the post-law period, suggesting that employers adjusted to some extent on the intensive margin, and secondly, it appears that hours of work increased by more in areas where wages were lower in the pre-law period – driven largely
by the fall in part-time employment.

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Bhorat, Haroon, Ravi Kanbur, and Benjamin Stanwix. "Estimating the impact of minimum wages on employment, wages and nonwage benefits: The case of agriculture in South Africa." DPRU Working Paper 12/149 , no. 12/149 (2012).
Copyright DataFirst, University of Cape Town