A Study of the Wage Impacts of Unions and Industrial Councils in South Africa

Abstract

Some argue that a high union wage premium and the industrial council system are important causes of inflexibility in the South African labor market. We estimate union premia on the order of 20 percent for African workers and 10 percent for White workers. We also find that African nonunion workers who are covered by industrial council agreements receive a premium of 6-10 percent; the premium is positive but not statistically significant for Whites. In addition, although the union gap is smaller inside of the industrial council system than outside of the system for Africans, the total union premium for union members covered by an industrial council agreement is similar to the union premium outside of the industrial council system. Among Africans, the industrial council and union wage gaps are largest among low wage workers.