Can Minimum Wages Effectively Reduce Poverty under Low Compliance? A Case Study from the Agricultural Sector in South Africa

Ihsaan Bassier and Vimal Ranchhod

Review of Political Economy, 2024, vol. 36, issue 2, 398-419

Abstract: What were the effects of a 52 per cent increase in the minimum wage in the agricultural sector in South Africa in 2013? We estimate the short run effects of this policy change on the income, employment, and poverty rate of farmworkers, using individual-level panel data from the Quarterly Labour Force Surveys (QLFS). Before the implementation date, 90 per cent of farmworkers were paid below the new minimum wage level. We find that the wage gain of farmworkers is strongly quadratically related to pre-implementation wages, suggesting lower compliance as the gap between the minimum and the pre-implementation wage increases. We estimate that farmworkers received a median wage increase of 9 per cent as a result of the policy, and we find no evidence of job losses. Overall, farmworkers were 7 per cent less likely to have household income per person below the poverty line. One possible explanation for these outcomes is that endogenous compliance may mitigate against unemployment effects. While the minimum wage literature is large, our paper adds to the small subset of this literature on large increases, partial compliance, and poverty effects.

Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/09538259.2024.2318957 (text/html)
Access to full text is restricted to subscribers.

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:taf:revpoe:v:36:y:2024:i:2:p:398-419

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CRPE20

DOI: 10.1080/09538259.2024.2318957

Access Statistics for this article

Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon

More articles in Review of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().