Provincial variation in the effects of minimum wage laws in South Africa, 2000-2007.
Minimum wage laws are one of the most common forms of labour market legislation used internationally. Such laws were first implemented in South Africa in 2001, with the mandated wage differing across sectors. However, existing research on this topic tends to analyse the law’s effects at a national level, which does not allow for geographical variation in effectiveness. The overall objective of this research is to estimate and compare the effect of minimum wages on employment and wages in three provinces in South Africa, following the Bhorat, Kanbur and Mayet (2013) methodology. This study also considers the extent of compliance with the law. The provinces considered for analysis are KwaZulu-Natal, Gauteng and the Western Cape, which contain the largest urban centres and the bulk of economic activity in South Africa. The sectors which are included are domestic workers, retail and private security, all of which are predominately located in urban areas. The research shows that non-compliance within the security sector, across all three provinces are high, whereas, the non-compliance to the law for the retail and domestic sector, reduced substantially between the years of analysis. The results from the employment probability models showed that there was an overall decreased likelihood of employment in the domestic and security sectors, for all three provinces. KwaZulu-Natal and Gauteng saw significant increases in real wages between periods, for the domestic sector. Western Cape retail workers felt an increase in real wages but a negative effect in KwaZulu-Natal. The security sector in KwaZulu-Natal faced higher real wages, whereas a lower wage effect was found in Gauteng. It is apparent from the estimated results that the law has different effects in different provinces, which therefore provides support for the analysis of minimum wage effects at the provincial level.