Minimum Wages and Youth: The Case of South Africa

Abstract

This article applies the econometric methods of the new minimum wage literature to assess the impact of minimum wages on employment, wages and non-wage benefits for youth in South Africa. We find a statistically significant but small decline in youth employment in Agriculture. In addition, a small but significant increase in youth employed in Retail and the Taxi sector is observed. For the other sectors, we find no effect. There is a positive wage effect for young people in four of the six minimum wage sectors in our preferred estimation. At the intensive margin, hours of work were adjusted downward in three of the six minimum wage sectors and increased in the post-law period for one sector. It is only in one sector, Retail, where the law appears to have increased the probability of having a written employment contract. In addition, we measure minimum wage violation and find significant levels of non-compliance with the law for a large cohort of young people in South Africa.