Minimum wage-setting by the Employment Conditions Commission in South Africa, 1999-2015

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University of Cape Town

The growing literature on the institutions that set minimum wages points to the importance of institutional design but lacks empirical studies of how and why institutions work in different ways. This paper examines the case of the Employment Conditions Commission (ECC) in South Africa between its establishment in 1999 and 2015. The ECC, comprising members nominated by organised business and labour together with government-appointed experts, set sectoral minima in low-wage sectors without strong collective bargaining. The ECC tended towards caution in setting and raising minima, for at least three reasons: concern over possible job destruction (in an economy with very high unemployment already), low baseline minima inherited from previous or other institutions, and the negotiating styles of labour and business representatives. The ECC raised sectoral minima steadily in real terms, in some cases more than doubling over about a decade. On only one occasion, under intense political pressure from the government, did the ECC recommend a major real increase. Lacking independent research capacity and hence good evidence on the size of employment effects, the ECC was vulnerable to political pressure (from the government) or criticisms (from trade unions, from 2012 onwards).