Minimum Wages in a Segmented Labor Market: Evidence from South Africa

Meghan J. Millea (), Jon Rezek, Brian Shoup and Joshua Pitts
Additional contact information
Meghan J. Millea: Mississippi State University
Brian Shoup: Mississippi State University

Journal of Labor Research, 2017, vol. 38, issue 3, No 4, 335-359

Abstract: Abstract The segmented labor market model describes the impacts of minimum wages on covered and uncovered sectors. This paper examines the impacts of an industry-specific minimum wage in South Africa, a state characterized by high unemployment, a robust union movement, and the presence of a large informal sector. Under the industry-specific wage law, formal agricultural and household workers are covered, while workers in other sectors are not. The unique aspect of this paper lies in the ability to compare the impacts of minimum wage legislation on formal covered, informal covered, formal uncovered, and informal uncovered workers. This natural experiment allows us to test whether industry-specific minimum wage legislation leads to higher wages, whether wage increases are restricted solely to covered formal sectors or if there are spillover effects, and whether such legislation manifests in disemployment effects. We find evidence of higher wages yet disemployment among black workers in formal markets. In informal markets we find no employment effects, but higher wages in formal markets appear to have spilled over into informal markets in covered sectors.

Keywords: Minimum wage; South African labor markets; Covered and uncovered sectors; Informal labor markets (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1007/s12122-017-9241-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jlabre:v:38:y:2017:i:3:d:10.1007_s12122-017-9241-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/12122

DOI: 10.1007/s12122-017-9241-z

Access Statistics for this article

Journal of Labor Research is currently edited by Ozkan Eren

More articles in Journal of Labor Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().