Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

Dinkelman, Taryn; Ranchhod, Vimal

doi:10.1016/j.jdeveco.2011.12.006

Cited by 108 publications

(85 citation statements)

References 31 publications

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“…We find that there is evidence of partial compliance, where employers adjust wages upwards as a result of the law, but not all the way to the minimum wage. This supports work by Dinkelman and Ranchhod (2012), Dinkelman et al (2014) who observe partial response to the minimum wage law in the Domestic Worker sector in South Africa. However, unlike Dinkelman and Ranchhod (2012), we find that when the minimum wage is set at a higher level relative to existing mean wages in a district, there is evidence of greater partial compliance, which is predicted by the theoretical model for some parameter values.…”

Section: Resultssupporting

confidence: 88%

“…Neither variable had any significant impact on our results. 9 This approach follows Lee (1999), and Dinkelman and Ranchhod (2012). 10 In order for us to identify the effect of the minimum wage law we must assume that in the absence of the law change, low wage-gap districts would be on the same trend in outcomes as high wage gap districts (as in Dinkelman & Ranchhod, 2012).…”

Section: Endnotesmentioning

confidence: 99%

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Partial minimum wage compliance

Bhorat

Kanbur

Stanwix

2015

IZA J Labor Develop

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In many developing countries, a significant portion of the wage distribution is found below the legal minimum wage. In order to fully understand the nature of this non-compliance, we need to compare the counterfactual wage distribution without the minimum wage law to the current wage distribution. Such a comparison could reveal partial compliance, where employers raise wages some of the way to the minimum wage, to balance out the benefits of non-compliance with the costs and penalties to the extent that they depend on the gap between the legal minimum wage and the wage actually paid. This paper presents a simple model of such partial compliance and uses its predictions to structure an empirical investigation of the impact of introducing a minimum wage law for agricultural workers in South Africa. We find that partial compliance is indeed taking place and further, the lowest wages are being raised disproportionately, consistent with the predictions of the model. JEL codes: J23, J25, J31, J32, J38, J43

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Section: Resultssupporting

confidence: 88%

Section: Endnotesmentioning

confidence: 99%

Partial minimum wage compliance

Bhorat

Kanbur

Stanwix

2015

IZA J Labor Develop

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“…With respect to the former, several studies have found low enforcement of minimum wages in South Africa (Hertz 2005, Yamada 2007, Dinkelman and Ranchhod 2010. With respect to the latter, in our sample only 2 percent of employed respondents report being union members (CAPS, Wave 2).…”

Section: Model and Estimationmentioning

confidence: 50%

Prospective Analysis of a Wage Subsidy for Cape Town Youth

Levinsohn

Pugatch

2011

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Recognizing that a credible estimate of a wage subsidy's impact requires a model of the labor market that itself generates high unemployment in equilibrium, we estimate a structural search model that incorporates both observed heterogeneity and measurement error in wages. Using the model to examine the impact of a wage subsidy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R660 in mean accepted wages and a decrease of 15 percentage points in the share of youth experiencing long-term unemployment.

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“…In another interesting piece of evidence, Jales(2014) shows that there is substantial spike at the minimum wage in the wage distribution in the formal sector in Brazil but there is also an almost equally large spike in the wage distribution for the informal sector (which, by definition, is not directly affected by labour regulations.) Similarly, Dinkelman and Ranchod(2012) find that the introduction of a minimum wage in the informal domestic workers sector in South Africa led to an increase in wage paid toward the minimum wage even though there was no enforcement of the new law. They interpret this as potential evidence in favour of a role for fairness standards in wage setting, with the minimum wage acting as the fairness benchmark.…”

Section: Does the Wage Equal The Value Of Marginal Product?mentioning

confidence: 94%

What is a minimum wage for? Empirical results and theories of justice

Green¹

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract I undertake a political economy exercise of a type described in John Rawls' A Theory of Justice; namely, one in which economic institutions are judged by how well they match the key principles in theories of distributive justice. My main contention is that such an exercise is integrally related not only to economics in general but to empirical economics in particular. I argue that most standard theories of justice place a large weight on self and social respect and that such respect has alot to do with the position a person holds in the productive process -their wage and employment outcomes. That, in turn, means that assessments of justice in the real world hinge critically on how labour markets actually function in assigning wages and employment. The answers to these questions are ultimately empirical. I explore these ideas by examining one particular institution (the minimum wage) in relation to a set of the most prominent recent theories of distributive justice. This exercise leads to a different emphasis on what minimum wage related outcomes need study, and to a claim that minimum wage setting is related to standards of fairness defined relative to the location of the low skilled wage distribution. Terms of use: Documents in

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Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

Cited by 108 publications

References 31 publications

Partial minimum wage compliance

Partial minimum wage compliance

Prospective Analysis of a Wage Subsidy for Cape Town Youth

What is a minimum wage for? Empirical results and theories of justice

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