Wage Effects of Unions and Industrial Councils in South Africa

Abstract

Using data for 1995, the authors estimate union wage premia of about 20% for African workers and 10% for white workers in South Africa—roughly similar to estimates reported for other countries, including the United States. African nonunion workers who were covered by industrial council agreements received a premium of 6–10%; the premium was positive but not statistically significant for whites. Although the union/nonunion wage gap was smaller inside the industrial council system than outside it for Africans, the total union premium for union members covered by an industrial council agreement was similar to the union premium outside the industrial council system. Among Africans, the industrial council and union wage gaps were largest among low-wage workers. These findings, the authors conclude, do not support the common claim that a high union wage premium and the industrial council system are the primary causes of high unemployment in the South African labor market.