Employment effects of bargaining council decisions

r4d Working Paper 2017/04 by Wayde Thomas Flowerday. Neil Rankin and Volker Schöer

ABSTRACT: South Africa has a unique collective bargaining structure; one whereby wages are mostly set at a sectoral level. One of the approaches to this sectoral wage determination is through bargaining councils. This paper tests the effects of bargaining councils on wage and employment outcomes in the South African labour market. This paper concludes that despite minimum wages prescribed by said bargaining councils, the average employee still receives a wage that is 42% below the stipulated minimum. Furthermore, the extension of updated bargaining council agreements is shown to have a detrimental effect on the mass of employment, whereby it decreases by approximately 8%. These results are robust to both individual and firm level characteristics.