Determinants of Non-Compliance of the National Minimum Wage in South Africa

Ellis, Kirsten

Determinants of Non-Compliance of the National Minimum Wage in South Africa

Thesis / Dissertation

2026

Publisher

University of Cape Town

Department

School of Economics

Faculty

Faculty of Commerce

Abstract

South Africa implemented a National Minimum Wage (NMW) Act in January 2019, yet nearly 5 years later, over a third of their labour force continues to earn below the mandated hourly rate. This study examines non-compliance to the NMW Act in South Africa, with a central focus on the extent and depth of violations across different demographic and industry groups. Using data from the Quarterly Labour Force Survey (QLFS) for Quarter 2 of 2024 (April -June), this paper analyses the influence of various socio-economic factors, including gender, race, age, education, industry type, occupation, union status, amongst many other descriptive institutional and spatial variables, on the probability and depth of minimum wage violation. Non-compliance is quantified in this study using indices of violation, such as the headcount and depth measures, as well as a key measure of interest, the Kaitz ratio, which compares the national minima to median real wages. The results reveal notable differences in noncompliance, where historically disadvantaged groups and younger, less educated individuals, as well as more informal style workers are more likely to receive sub-minimum wages. Evidence from this study further suggests non-compliant behaviour is significantly affected by the level at which the legislated minimum is set relative to the income distribution, depicted by the Kaitz ratio, confirming similar findings discussed in much of the prevailing literature. Policy implications suggest a need for enhanced enforcement mechanisms and a more targeted approach to addressing non-compliance that considers both individual characteristics and the broader socio-economic conditions within South Africa. This research contributes to a deeper understanding of minimum wage compliance within a developing economy.