Wages and wage elasticities for wine and table grapes in South Africa

Abstract

A survey of 190 wine and table grape farmers in the Western Cape puts the average wage for farm labour at R928 per month in 2003 and R1123 per month in 2004. Output per worker has doubled since 1983. On farms with grape harvesters, labour is 30 per cent more productive (48 ton/worker) than on farms where wine grapes are picked by hand (37 ton/worker). At 9.75 tons per worker, table grapes are four times as labour-intensive as wine grapes. Resident men dominate the workforce on wine farms, while the resident female workforce is 20 per cent larger than the resident male workforce on table grape farms. Seasonal workers contribute a third of labour in table grapes, and brokers less than ten per cent in either case. In a single-equation short-run Hicksian demand function, wage, output, capital levels and mechanisation intensities are highly significant determinants of employment. Higher wages decrease employment and larger output increases employment. More mechanisation, measured by the number of tractors used to produce a ton of fruit, raises labour intensity too. Grape harvesters could not be shown to reduce jobs. The ten per cent rise in the minimum wage planned for March 2005 could reduce employment by 3.3 per cent in the wine industry and 5.9 per cent in the table grape industry, but it is more likely that the wage increase will be offset against fewer benefits. The average expected impact is about the same as for all agriculture and manufacturing as a whole. 1. Conradie BI (2004). The effect of the level of the agricultural minimum wage in the Western Cape wine industry after one year. Presented at AEASA, Somerset West, 22-23 September 2004. Department of Agriculture (2004). Abstract of Agricultural Statistics.

Determinants of the demand for regular farm labour in South Africa, 1960–2002

“…As noted in the Introduction, there are only two documented empirical estimates of the price (wage) elasticity of demand for farm labour in South Africa, namely -1.39 for regular farm labour in KwaZulu-Natal over the period -1978(Latt and Nieuwoudt, 1985, and -0.3 for farm labour in the Breërivier Valley of the Western Cape Province (Conradie, 2005). As comparisons for research on unskilled labour, Mazumdar and van Seventer (2002) estimated the price elasticity of demand for unskilled labour in the SA manufacturing sector as -0.9 for the 1980s and -1.15 for the 1990s.…”

“…A relative increase in the cost of labour motivates farmers to replace labour with machinery, machinery contractors, labour contractors or new technologies that are labour-saving. This in turn can lead to considerable unemployment if the demand for labour is very price elastic (Lianos, 1972;Conradie, 2005), and output will fall as production costs increase (Burton et al, 1970).…”

Impact of the Sectoral Determination for Farm Workers on the South African Sugar Industry: Case Study of the KwaZulu-Natal North and South Coasts

“…Recent research by Conradie (2003 and2005), performed after the implementation of the statutory minimum wages in South Africa, found that 2 In contrast, Katz and Krueger (1992) and Card and Krueger (1995) found a positive relationship between minimum wages and employment. Dickens, Machin and Manning (1999:1) found that "minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment" in the UK.…”

“…While she found no evidence of job shedding, there was a slowdown in job creation. Conradie (2005) found that, despite an increase in the minimum wage at a rate above the inflation rate, the increase was unlikely to result in significant job losses, although seasonal workers are more at risk than permanent labour. The fact that the wine industry was doing well financially enabled farmers to pay the higher real wages without significantly cutting back on employment.…”

“…Investigating the impact of the minimum wages on mechanisation, Conradie (2003 and2005) found no evidence that tractors and labour were substitutes, or that grape harvesters reduced employment.…”