Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa

University of Cape Town Development Policy Research Unit Working Paper No. 11/146

17 Pages Posted: 4 Dec 2012

See all articles by H. Bhorat

H. Bhorat

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

Sumayya Goga

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

Carlene van der Westhuizen

University of Cape Town

Date Written: December 1, 2011

Abstract

The literature on the union wage gap in South Africa is extensive, spanning a range of datasets and methodologies. There is however little consensus on the appropriate method to correct for the endogeneity of union membership or the size of the union wage gap. Furthermore, there are very few studies on the bargaining council wage premium in South Africa due to lack of data on coverage of employees under these agreements.

Our study, using 2005 Labour Force Survey data, firstly reconsiders the union wage gap controlling for both firm-level and job characteristics. When correcting for endogeniety of union status through a two-stage selection model and including firm size, type of employment, and non-wage benefits, we find a much lower union wage premium for African workers in the formal sector than premia reported in some previous studies. Secondly, our study estimates bargaining council wage premia for the private and public sectors. We find that extension procedures are present in both private and public bargaining council systems, but that unions negotiate for additional gains for their members at the plant-level. Furthermore, there is some evidence that unions negotiate for awards for their members in the private sector, irrespective of bargaining council coverage.

Keywords: union wage gap, South Africa, Labour Force Survey, public bargaining council systems

Suggested Citation

Bhorat, Haroon I. and Goga, Sumayya and van der Westhuizen, Carlene, Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa (December 1, 2011). University of Cape Town Development Policy Research Unit Working Paper No. 11/146 . Available at SSRN: https://ssrn.com/abstract=2184245 or http://dx.doi.org/10.2139/ssrn.2184245

Haroon I. Bhorat (Contact Author)

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

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Sumayya Goga

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

Private Bag
Rondesbosch, 7700
South Africa

Carlene Van der Westhuizen

University of Cape Town ( email )

Private Bag
Rondesbosch, 7700
South Africa

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