Analysing Wage Formation in the South African Labour Markets: The Role of Bargaining Councils

Development Policy Research Unit Working Paper No. 09/135

98 Pages Posted: 4 Dec 2012

See all articles by H. Bhorat

H. Bhorat

University of Cape Town (UCT) - Development Policy Research Unit

Carlene van der Westhuizen

University of Cape Town

Sumayya Goga

University of Cape Town (UCT) - Development Policy Research Unit

Date Written: January 1, 9

Abstract

The role of bargaining councils, the central pillar of collective bargaining in South Africa, in the formation of wages is important in the context of high unemployment rates in South Africa. In this study we find that while institutionalized collective bargaining system covered substantially more formal sector workers in 2005 (30 percent) compared to 1995 (15 percent), this still meant that less than a third of the formally employed were covered by bargaining councils. Notwithstanding this, the overall rise in the number of workers covered by bargaining council agreements between 1995 and 2005 was driven almost primarily by the introduction of public sector councils. Thus, bargaining council coverage in the first decade of democracy is characterized by an erosion of coverage within the private sector bargaining council system on the one hand and the rapid rise of this system of bargaining in the public sector. On the other hand the descriptive data and multivariate models show therefore a significant wage premium associated with coverage under public sector councils in 2005, in excess of the large and significant union wage premium. The decline in the bargaining council system in the private sector is accompanied by declining wage premia for formal sector workers covered under private sector bargaining council agreements, with our preferred specification in 2005 indicating no significant private sector bargaining council wage premium.

Keywords: bargaining councils, South Africa

Suggested Citation

Bhorat, Haroon I. and van der Westhuizen, Carlene and Goga, Sumayya, Analysing Wage Formation in the South African Labour Markets: The Role of Bargaining Councils (January 1, 9). Development Policy Research Unit Working Paper No. 09/135. Available at SSRN: https://ssrn.com/abstract=2184181 or http://dx.doi.org/10.2139/ssrn.2184181

Haroon I. Bhorat (Contact Author)

University of Cape Town (UCT) - Development Policy Research Unit ( email )

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Rondesbosch, 7700
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27 21 423 2501 (Fax)

Carlene Van der Westhuizen

University of Cape Town ( email )

Private Bag
Rondesbosch, 7700
South Africa

Sumayya Goga

University of Cape Town (UCT) - Development Policy Research Unit ( email )

Private Bag
Rondesbosch, 7700
South Africa

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