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.