Annual Forum Papers

Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers

  • Year: 2000
  • Author(s): Haroon Bhorat

A key component of labour market policy debate in South Africa, has been around the role of wages in either hindering employment creation, or conversely as a tool for reducing poverty and acting as a catalyst for aggregate demand growth. This debate has come to the fore more recently with the Department of Labour’s recent call for public submissions and public comment on the issue of minimum wages and conditions of employment for domestic and farm workers. An analysis of the first of these two issues, namely wages, will place into sharp focus the stringent trade-offs faced by the Department of Labour in this part of the workforce.

This paper therefore attempts a very basic simulation exercise to test some of these hypotheses concerning the functioning and response behaviour of the labour market. In trying to focus on the poor in the labour market, the study chooses three unskilled labour categories, with the emphasis being on the two most indigent groups amongst the employed, namely domestic workers and farm workers. It is amongst these two groups, that the trade-offs between poverty reduction and employment losses are most starkly evident.