Government's minimum wage regulations for domestic workers,
which came into effect two years ago, have dramatically raised
earnings and reduced working hours without leading to significant
job losses.
Domestic worker earnings have increased by around 20% since
minimum wages became law in November 2002. Over the same period, the
drop in employment levels has been insignificant at around 3%.
These findings are part of a study by American University
economist Tom Hertz into whether minimum wages have benefited SA's
1m domestic workers, about 10% of the workforce.
Hertz bases his data on the labour force surveys conducted by
Statistics SA. He presented the findings at a conference hosted by
independent think-tank Tips and the University of Cape Town's
Development Policy Research Unit last week.
The setting of minimum wages for the domestic and agricultural
sectors constituted a major intervention in the labour market, as
the minimum pay levels for both were set well above the prevailing
market rate. In the case of a domestic worker in an urban area the
minimum was set at R4,10/hour - well above the prevailing rate of
R3,29/hour.
At the time, 74% of urban domestic employees were earning below
the minimum (see table). Hertz says the evidence shows that the lot
of domestic workers has improved substantially. When compared with
similar, low-skill occupations, domestic workers did very well, with
nominal hourly wages improving by 23% over a year, compared with 5%
among other categories.
This improvement in earnings coincides clearly with the
regulations. The greatest improvement in wages occurred in the areas
where they had been lowest, reinforcing the conclusion that they
were a result of government intervention.
Hours of work also fell about 4% for domestic workers, while
remaining constant for other comparable categories of workers, says
Hertz. Despite minimum wages being set well above market rates,
employment levels were not significantly affected. Employment among
domestic workers fell by roughly 3%, but the decrease mirrors the
rate of decline of employment for demographically similar workers in
other occupations.
The level of compliance by employers has remained low, however.
By September 2003, 61% of workers still earned below the minimum,
indicating that most employers responded to government's minimum
wages by ignoring them, rather than dismissing employees.
At the same time, however, a vastly increased number of domestic
employees made use of the Council for Conciliation, Mediation &
Arbitration (CCMA) in the eight months after the introduction of
minimum wages (see graph). Prior to the regulations the CCMA
received 760 complaints a month from domestic workers, mainly for
unfair dismissal. This grew to 1 155/month after the regulations
came into effect. Hertz concedes that this may be a "disemployment
effect" (dismissals) or may be a result of domestic workers being
more aware of their rights.
Nonwage conditions also improved for domestic workers in the
period under study. More workers reported having a written contract
of employment (25% in September 2003 compared with 7% 18 months
earlier); and 25% reported that their employers made unemployment
insurance fund deductions, a requirement introduced in April 2003.
Hertz says it's clear "the regulations are having an impact on
the behaviour of many employers".
