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

University of Cape Town Development Policy Research Unit Working Paper No. 12/151

19 Pages Posted: 5 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: July 1, 2012

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 the lack of data on coverage of employees under bargaining council 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, the type of employment, and non-wage benefits in our wage estimations, 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 the private and public bargaining council systems, but that unions negotiate for additional gains for their members at the plant-level. The total estimated wage premium for formal sector African workers in the public sector who are both union members and covered by bargaining council agreements stands at 22 percent. Furthermore, there is some evidence that unions negotiate for awards for their members in the private sector, irrespective of bargaining council coverage.

Suggested Citation

Bhorat, Haroon I. and van der Westhuizen, Carlene and Goga, Sumayya, Institutional Wage Effects: Revisiting Union and Bargaining Council Wage Premia in South Africa (July 1, 2012). University of Cape Town Development Policy Research Unit Working Paper No. 12/151, Available at SSRN: https://ssrn.com/abstract=2184253 or http://dx.doi.org/10.2139/ssrn.2184253

Haroon I. Bhorat (Contact Author)

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

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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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