The Impact of the National Minimum Wage in South Africa: Early Quantitative Evidence

Haroon Bhorat, Adaiah Lilenstein and Benjamin Stanwix

Working Papers from University of Cape Town, Development Policy Research Unit

Abstract: This report provides a basic quantitative assessment of the recent introduction of a National Minimum Wage (NMW) in South Africa, with a specific focus on the short-term labour market impacts. We use labour force survey data to examine and measure the quantitative effects of the NMW, which was introduced in South Africa on January the 1st 2019. Of primary interest are the effects of the policy on wages, employment, and hours of work, over a 12-month period following when the legislation came into force. In order to examine these impacts, we begin by providing a brief overview of the NMW, placing it in the South African labour market context, and noting how the NMW differs from the previous sectoral minimum wage regime. We then describe two separate analytical approaches that are used to test the impact of the NMW, and introduce the relevant data. We present both descriptive and econometric data to examine the impact of the NMW, where two different empirical strategies are used. The first relies on the standard QLFS cross-sectional data, while the second makes use of the smaller longitudinal component of the survey. In both cases, our approach builds on pre-existing methodologies that have been used to examine minimum wage impacts at the sectoral level. We then present and discuss the key findings, which are based on both descriptive trends and regression analysis. While the timeframe of this analysis remains relatively short, and results should therefore be interpreted with some caution, our work using the cross-sectional data shows no statistically significant impact of the NMW and we find no evidence of an associated decrease in employment.

Keywords: National Minimum Wage; South Africa; wage regulation; labour market impacts; wages; employment; hours of work (search for similar items in EconPapers)
JEL-codes: J08 J20 J21 J30 J38 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Working Paper Series by the Development Policy Research Unit, April 2021, pages 1-42

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