The DPRU's research on minimum wages has become the international focal point for African work on understanding the impact of minimum wages in the region. Prof Haroon Bhorat, DPRU Director, is widely considered to be one of the leading experts in the world on understanding minimum wages and their impact in the developing country context.
This research has elicited a significant debate and discussion within the academic and policy community and the ongoing body of work is viewed as a novel intellectual contribution to the South African (and arguably developing country literature), ultimately published in global economics journals such American Journal of Agricultural Economics, The World Bank Research Observer, Labour, Review of Development Economics, IZA-JOLD, Industrial & Labor Relations Review, Journal of African Economies, and the British Journal of Industrial Relations. In addition, Prof Bhorat served as co-editor in turn for an IZA-JOLD global Special Issue on Minimum Wages In Developing Countries.
The DPRU’s minimum wage research has directly informed the South African government’s policy decisions on minimum wage laws, both at the sectoral and national level. While we attempt variously to add methodological, analytical and policy value to specific research questions, this research also feeds into policy decisions and pronouncements at the highest level – including Cabinet memoranda, State of the Nation Addresses, and legislative promulgations. Major challenges in South Africa include poverty, wage inequality, and labour market vulnerability. Our work on minimum wages and labour regulation deepens our understanding of how policy interacts with the economic realities in the country, in order to create space for informed policy and debate about solutions that improve worker wellbeing.
For example, in 2020 we completed an impact analysis of the effects of the National Minimum Wage (NMW), a project commissioned by the South African National Minimum Wage Commission. This analysis used a cutting-edge econometric technique, involving a combined regression discontinuity and standard difference-in-difference design model. The impacts of the NMW are of direct national economic policy concern in South Africa, and have an impact on millions of low wage workers, and as such, this research has clear socio-economic significance and policy relevance.
We also pursue innovative research measuring and understanding the impact of minimum wage violation in the developing world – via the development of a Multiple Index of Violation (MVI). The MVI is a novel index applying the Alkire-Foster method of measuring multidimensional poverty and uses principal components to check the robustness of the measure.
In close collaboration with colleagues at Cornell University, we are contributing to both theoretical and applied aspects in the field, by using robust econometric and empirical tools to engender a completely new, and globally innovative set of methods and ideas on the economics of compliance and enforcement. In particular, their research agenda has focused on measuring the extent, and understanding the impact, of violation of labour laws – as well as those factors which may impact on and determine the incentive to violate the law. We have become leaders in the field in terms of modelling the determinants of violation of labour laws by firms, providing novel econometric solutions to the problems of endogeneity inherent in this type of work.
Our work remains at the forefront of such research in South Africa, and has contributed to similar discussions and debates globally, where the MVI, or its antecedent, the V-alpha index, has been applied in 24 countries around the world: Chile, Ecuador, Honduras, Namibia, Kenya, Tanzania, Zambia, Mauritius, Comoros, Seychelles, Czech Republic, Italy, Hungary, Poland, Lithuania, Slovakia, Slovenia, Estonia, Bulgaria, Romania, Latvia, China, India, and Jordan.
Essentially, the aim of the MVI work is to uncover levels of worker vulnerability by measuring the extent to which workers are do not have access to wage and non-wage rights as set out in labour legislation.