Type | Conference Paper - The Global Labor Standards and Living Wages Working Group Meeting, Political Economy Research Institute, University of Massachusetts, April 19-20, 2002 |
Title | Forecasting the effects of pending minimum wage legislation on poverty in South Africa |
Author(s) | |
Publication (Day/Month/Year) | 2002 |
City | Amherst |
Country/State | United States |
URL | http://scholar.google.co.za/scholar?hl=en&q=Forecasting+the+Effects+of+Pending+Minimum+Wage+Legislation+Hertz&btnG=Search&as_sdt=0,5&as;_ylo=&as_vis=0 |
Abstract | In July of 2001, after two years of public hearings and deliberation, South Africa’s Minister of Labour released a report detailing a recommeded schedule of minimum wages for the country’s 800,000 domestic service workers (Department of Labour 2001a). In September a second report was released with recommneded minimum wage levels for an estimated one million farmworkers (Department of Labour 2001b). Both are expected to be implemented soon. These developments fulfill a long-time ANC commitment and must rank as a significant political victory for some of South Africa’s poorest workers Whether the laws lead to an equal economic victory depends crucially on the degree to which they are enforced and on the changes in employment, if any, that they induce. Also important for a normative assessment of the impact of minimum wages is the choice of evaluative standard, since the effects of the law will be different at different points in the income distribution. In this paper I estimate the net effect of the proposed minimum wage law for domestic service workers.on their levels of poverty, ultrapoverty, mean and median household income, and mean log household income, under various assumptions about the magnitude of the employment response. Assuming perfect enforcement, I find that the proposed minimum wage levels are associated with decreases in poverty, ultrapoverty, and inequality, and increases in both mean and median household income, so long as the employment response is inelastic. The effect on mean log household income (a measure which effectively places more weight on very-low-income households) appears positive at elasticities of roughly -0.6 or less (in absolute value). It thus appears that minimum wages on the order of those proposed for domestics in South Africa may lead to noticeable reductions in the level of poverty and ultrapoverty for this class of low-paid workers, even if accompanied by non-trivial employment losses. |
» | South Africa - Integrated Household Survey 1993 |
» | South Africa - Project for Statistics on Living Standards and Development 1993 |