STRUCTURAL ANALYSIS OF MINIMUM WAGE RATES, UNEMPLOYMENT AND FOOD PRICES OF FARM WORKERS IN SOUTH AFRICA: CO-INTEGRATION APPROACH

Joseph Nembo Lekunze, Usapfa Luvhengo and Rangarirai Roy Shoko

Journal of Agribusiness and Rural Development, 2016, vol. 42, issue 4

Abstract: This paper examines the short- and long- term effects of increasing minimum wage rates for farm workers in South Africa on structural unemployment and rising food prices in the economy. The Pearson correlation model was used to establish association between variables. Analysis found a negative association (–0.651) between wage rate and employment of farm workers, while a positive (0.021) association was found to exist between wage rate (W) increases and food prices (Fp). No association (0.001) was found between employment and food prices (Fp). Co-integration was further employed to determine the short-term and long-term relationships, and the analysis found wages to have a positive and signifi cant (0.453) eff ect on structural unemployment of farm workers. Unemployment was observed to be wage elastic in the long term and wage inelastic in the short term. The long-term relationship showed increasing unemployment in agriculture (L) and rising food prices (Fp) (1.168), while the short-term relationship showed a signifi cant error correction coeffi cient (ECT) with an expected starting point of 41.9% adjustment rate towards long-term equilibrium within a year. Structural analysis confi rmed an inelastic demand for basic food. The study suggest government subsidies to farmers through cost-cutting technologies and farm worker’s skills development on the use of these technologies.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance; Community/Rural/Urban Development; Consumer/Household Economics; Crop Production/Industries; Demand and Price Analysis; Environmental Economics and Policy; Farm Management; Financial Economics; Food Consumption/Nutrition/Food Safety; Food Security and Poverty; Health Economics and Policy; Industrial Organization; Institutional and Behavioral Economics; International Development; International Relations/Trade; Labor and Human Capital; Land Economics/Use; Livestock Production/Industries; Marketing; Political Economy; Production Economics; Productivity Analysis; Public Economics; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods; Resource/Energy Economics and Policy; Risk and Uncertainty; Teaching/Communication/Extension/Profession (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pojard:253965

DOI: 10.22004/ag.econ.253965

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