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Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers

Author

Listed:
  • Haroon Bhorat

    (Development Policy Research Unit, University of Cape Town)

Abstract
This paper utilises a basic simulation exercise to analyse the possible poverty and employment reducing effects, of instituting a minimum wage in the South African labour market. The simulation is undertaken for three groups of unskilled workers, namely domestic workers, farm workers and drivers. The results showed firstly that a wage policy pursued to reduce indigence amongst the target occupations will have a relatively small impact on poverty levels. It took very large, and in policy terms highly unlikely, wage adjustments to ensure a tangible poverty reduction impact. Secondly, it was evident that the results displayed the fact that most poor domestics and farm labourers were in fact quite far below the poverty line rather than earning just below R650 per month. Thirdly the employment-wage results show that a minimum wage policy would run the serious risk of significant short-run employment losses to accompany the poverty-reducing outcomes. In essence, the analysis suggests that poverty eradication amongst domestic and farm workers cannot take place solely through a minimum wage policy. This is not the problem of minimum wage legislation per se, but rather the very high incidence of poverty found amongst domestic and farm workers. Ultimately, if a minimum wage policy was considered in order to reduce poverty levels amongst these workers, it would not serve the purpose of significant poverty alleviation amongst its target population.

Suggested Citation

  • Haroon Bhorat, 2000. "Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers," Working Papers 00041, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:00041
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    File URL: http://hdl.handle.net/11427/7228
    File Function: First version, 2000
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Murray Leibbrandt & Haroon Bhorat, 1999. "Correlates of Vulnerability in the South African Labour Market," Working Papers 99027, University of Cape Town, Development Policy Research Unit.
    2. Haroon Bhorat, 1999. "Public Expenditure and Poverty Alleviation in the South African Labour Market," Working Papers 99026, University of Cape Town, Development Policy Research Unit.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Meghan J. Millea & Jon P. Rezek & Brian Shoup & Joshua Pitts, 2017. "Minimum Wages in a Segmented Labor Market: Evidence from South Africa," Journal of Labor Research, Springer, vol. 38(3), pages 335-359, September.
    2. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2014. "Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1402-1419.
    3. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
    4. Marlies Piek & Dieter von Fintel, 2020. "Sectoral minimum wages in South Africa: Disemployment by firm size and trade exposure," Development Southern Africa, Taylor & Francis Journals, vol. 37(3), pages 462-482, May.
    5. Andalón, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute of Labor Economics (IZA).
    6. Claire Bénit & Marianne Morange, 2004. "Les domestiques, la ville et l'accès à l'emploi au Cap et à Johannesburg : logiques de proximité et logiques de réseau," Revue Tiers Monde, Programme National Persée, vol. 45(179), pages 539-565.
    7. Stephen Devereux, 2005. "Can minimum wages contribute to poverty reduction in poor countries?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(7), pages 899-912.
    8. Richard Walker, 2003. "Reservation Wages-Measurement and Determinants: Evidence from the KMP Survey," SALDRU/CSSR Working Papers 038, Southern Africa Labour and Development Research Unit, University of Cape Town.

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    More about this item

    Keywords

    South Africa: wage adjustments; poverty alleviation; domestic workers; farm workers;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics

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