Black Trade Unions and the Wage Gap in South Africa¶
W. S. Siebert (1987). Black Trade Unions and the Wage Gap in South Africa. Managerial and Decision Economics, Vol. 8, No. 1. John Wiley & Sons.
| Type | journal article |
| Scope | Economics and economic history of apartheid |
| Method | econometric |
| Period studied | 1947–1984 |
| Regions | South Africa, Gold mining, Manufacturing, Foreign labour-sending states (Mozambique, Malawi, Lesotho, etc.) |
| Themes | labour markets wages, unions strikes, mining migrant labour, bantustans removals influx, manufacturing industrial policy, methods data sources |
| Citation key | siebert1987b |
Argument¶
Siebert asks why the black-to-white pay ratio rose in mining and manufacturing after 1971. He builds simultaneous labour demand and supply equations for black labour in gold mining and manufacturing, with demand and supply treated as partially separate markets because of influx control. He estimates them for 1947-84 and decomposes wage changes for 1975-80 and 1980-84. Rising gold prices, falling foreign mine labour and the relaxation of pass-law enforcement explain the 1970s, especially in mining. Black union density explains most of the real manufacturing wage rise after 1980. Union effects on mining wages cannot yet be seen, but are expected to follow. Union-induced employment losses are estimated to be small in manufacturing.
Evidence and method¶
Annual national series for 1947-84 from the Bulletin of Statistics and Statistical Yearbooks. These cover average earnings by race, employment, capital stocks, output and prices. Foreign mine labour comes from Lipton and the SAIRR. Pass-law prosecution counts, spliced from SAIRR and Bulletin of Statistics figures, are used as an index of influx control. Union membership, including unregistered unions, is interpolated from scattered estimates (Clack, SAIRR, Wiehahn, Department of Manpower). Census figures give the non-farm workforce, and per-pupil education expenditure is also used. Also drawn on are the Riekert and Wiehahn Commission reports and the models of Lucas (1985), Porter (1978) and Lundahl (1982).
Place in the debates¶
- Causes of the post-1971 rise in black relative wages (gold price vs unions vs foreign labour supply vs influx control) (see Racial wage gaps, wage convergence and wage determination). Multi-causal. The gold price and reduced foreign labour mattered in the 1970s, but unions were the main driver of manufacturing wages after 1980, and pass-law relaxation also contributed.
- Mine labour supply: excess/elastic supply (Lucas) vs supply constraints (see Racial wage gaps, wage convergence and wage determination). Finds an elastic supply to mining, as Lucas does, but with an elasticity above unity (1.32) where Lucas found it below. Treats the wage as market-determined rather than purely administered.
- Do black unions raise wages at the cost of employment and of workers outside the union sector? (see Black trade unions: growth, wage effects, Wiehahn and strategy). Union wage gains are real, but the estimated employment loss in manufacturing is small (about 20,000 jobs). Larger losses are possible if mine unionisation proceeds, with downward pressure on informal and rural wages.
- Effect of influx control on black wages (see Racial wage gaps, wage convergence and wage determination). Influx control depressed wages in both sectors by reducing labour mobility, so its abolition would raise wages without adverse employment effects.
Findings¶
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The black/white earnings ratio rose sharply after 1971 in both sectors, having fallen after the war. (p. 2)
the increase from 1971 to 1984 has been from 16% to 26%. The increase in the case of mining has been from 5% to 19%.
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Black unions were too weak in the 1970s to explain the narrowing of the wage gap before about 1980. (p. 2)
Black trade unions were not a force in the 1970s.
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The foreign share of the mine workforce fell sharply from 1974, which tightened mine labour supply. (p. 3)
a marked reduction in the proportion of the mining labour force made up by foreign blacks-from 70% in 1974 to 30% now
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The pass laws were extensively enforced and bureaucratised, and are expected to drive a wedge between sectoral wages. (p. 5)
arrests amounted to 20% of the black urban workforce in 1964) and there is a large bureaucracy of 50 000 to enforce them.
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Union density is significant in the manufacturing wage equation only after 1974 and not in mining. (p. 9)
Black trade union density is insignificant in mining, as expected, but significant for manufacturing after 1974.
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Pass-law prosecutions lowered manufacturing wages because the loss of mobility within urban areas outweighed the reduced urban labour supply. (p. 9)
Pass law prosecutions also appear to reduce manufacturing wages.
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The rise in union density accounts for most of the predicted 1980-84 real wage rise in manufacturing. (p. 10)
the log of black union density increased by 2.2, that is, from about 3% of the urban male workforce to 26%.
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Further union-driven wage gains in manufacturing are expected to be small. (p. 10)
Thus a movement to 36% unionization would only cause a further 2% real wage increase, ceteris paribus.
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The estimated employment cost of union-raised manufacturing wages is small. (p. 10)
reduced manufacturing employment by only 3.4% (= 0.155 x - 0.22), other things being equal.
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The gold price was the main factor behind the 1975-80 rise in mine wages, as the decomposition in Table 4 attributes 0.38 of the wage increase to it. (p. 10)
In the period 1975-80 the most important cause of the rise in mining wages, after allowing for the effect of rising consumer prices, is the rise in the gold price.
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Abolishing the pass laws would raise mining wages substantially. (p. 11)
The implication is that pass law abolition would increase wages in mining by about 110% ( = 1.7 x 0.065).
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Black real wages rose while white real wages stagnated after 1975, narrowing the gap. (p. 11)
Black real wages, on the other hand, have increased by leaps and bounds-by 35% in the case of mining and 17% in the case of manufacturing.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Bulletin of Statistics (earnings, employment and pass law series) | official statistical series | 1945-1984 | Source of average annual earnings by race for gold mining and manufacturing, used for the black/white wage ratios and the dependent variable in the supply equations. |
| S. A. Statistical Yearbooks and Bulletin of Statistics (employment series) | official statistical series | 1947-1984 | Provides black, white and coloured employment in gold mining and manufacturing for the demand equations. |
| Population censuses 1946, 1951, 1960, 1970, 1980 | population census | 1946-1980 | Construct the non-farm workforce denominator (with geometric interpolation) for union density and occupational shares of the black workforce. |
| Capital stock series for mining and manufacturing (fixed assets benchmarks plus gross capital formation) | official statistical series | benchmark years to 1984 | Real capital stock built by perpetual inventory from benchmarks and gross capital formation, used as a demand-side variable. |
| Output, value of output and price series (gold output in kilos, manufacturing volume index, value of gold sales) | official statistical series | 1947-1984 | Derive implicit product price deflators (1975=100) for sector wage deflation in the demand equations. |
| M. Lipton, Men of two worlds (Optima, 1982) and SAIRR Surveys (foreign blacks in mining) | secondary literature compilation | 1945-1984 | Source for series on foreign black workers in mining, a key supply variable. |
| Pass law prosecutions series: SAIRR (1963), Bulletin of Statistics (1947-50), SAIRR Surveys (1975-84) | official statistical series | 1947-1984 | Spliced series used as the index of influx control stringency (PASSLAW) in the supply equations. |
| Black trade union membership series (Clack PhD thesis; SAIRR Surveys; 1984 Department of Manpower Report; Wiehahn Commission and SAIRR 1983 for unregistered unions) | secondary literature compilation | 1945-1984 | Builds the black trade union density series, interpolated linearly between sparse observation years, used as the key union variable. |
| SAIRR Yearbooks (white-to-black per pupil education expenditure) | secondary literature compilation | 1945-1983 | Education expenditure ratio series, tried as a colour bar indicator but dropped for unstable sign. |
| Riekert Commission (1979), Report of the Commission of Inquiry into Legislation Affecting the Utilization of Manpower, RP 32 | commission or official report | 1979 | Used for the gold-price explanation, labour market structure, farm employment counts, evasion of pass laws, contract lengths, and pass law definition. |
| Wiehahn Commission (1979), Report of the Commission of Inquiry into Labour Legislation, Part I, RP47 | commission or official report | 1979 | Documents the recommendation to register black unions and the 50,000-70,000 workers in unregistered unions. |
| SAIRR Annual Survey (e.g. 1979 on Wage Board determinations) | secondary literature compilation | 1975-1984 | Supports the claim that Wage Board determinations for unskilled workers were not revised between 1973 and 1979. |
| Blacks (Urban Areas) Consolidation Act of 1945, Section 10; Industrial Conciliation Act | legislation gazette | 1945-1984 | Defines Section 10 residence rights and union recognition, structuring the segmented labour market. |
| Lucas (1985) Mines and migrants in South Africa: demand and supply specifications and results | secondary literature compilation | 1985 | Demand specifications adopted and results compared (supply elasticity). |
| Siebert (1975) PhD thesis, The Relative Pay of White and Non-White Workers in South Africa | secondary literature compilation | to 1975 | Background on mobility restrictions and Wage Board behaviour. |
New data¶
Author assembled annual time series for 1947-84 for gold mining and manufacturing (black/white earnings, employment, capital stocks, product prices, foreign mining labour, pass law prosecutions, union density, education expenditure ratio) from published sources, with interpolation and splicing.
Inference¶
Quantification: Econometric (causal design).
Structural supply-and-demand model of black labour in gold mining and manufacturing, estimated on annual time series 1947-84 with instrumental variables and AR error corrections; differentiated system used to decompose wage changes in 1975-80 and 1980-84 into contributions of exogenous variables.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Black trade union growth was the main factor behind real black manufacturing wage increases after 1980. (p. 63) | Manufacturing supply equation (post-1974 union coefficient 0.083, t=2.35) and decomposition in Table 3 using a union density series. | Partial data |
| Rising gold prices were the most important cause of mining wage rises in 1975-80 but not the full answer. (p. 63) | Gold price coefficients in mining demand and supply equations and Table 4 decomposition (0.38 effect). | Partial data |
| Relaxation of pass law enforcement raised black wages in both sectors; abolition could raise manufacturing wages by about 7%. (p. 63) | Pass law prosecutions series (spliced SAIRR and Bulletin of Statistics data) with negative coefficients in both supply equations; linear extrapolation. | Partial data |
| Reduced foreign labour supply after 1974 raised mining wages. (p. 62) | Foreign labour coefficient -0.199 (t=1.94) in the mining supply equation; foreign share fall from 70% to 30%. | Partial data |
| Union-induced manufacturing wage rises had only small employment effects (about 3.4%, 20,000 jobs), but unionisation in mining could shed up to 100,000 jobs across both sectors. (p. 64) | Estimated manufacturing and mining demand elasticities applied to the model-implied wage increase; mining projection assumes manufacturing union coefficient applies. | Asserted |
| Black-to-white pay ratios rose markedly after 1971 in both mining (5% to 19%) and manufacturing (16% to 26%). (p. 55) | Bulletin of Statistics earnings series, shown in Figs 1 and 2. | Systematic data |
| Black unions were not a significant force in the 1970s, so cannot explain the wage gap narrowing before about 1980. (p. 55) | Estimated union membership series including unregistered unions (Fig. 3), with low density in the 1970s. | Partial data |
The author's caveats¶
Notes that the data and specification problems require cautious interpretation; the union series quality is too poor for yearly rate-of-change use, though secular trends are considered reliable; the education expenditure variable was unstable and dropped; wage data for agriculture and informal sectors are sparse; the model fits mining less well than manufacturing.
Gaps in the evidence¶
Union density is built from sparse, interpolated membership counts and treated as exogenous, so the union effect is weakly identified and may reflect timing coincidence with other 1980s changes. The pass law prosecutions index is a crude proxy for influx control stringency; firm- or industry-level wage data, collective agreements, or strike and bargaining records (partly available in archives and employer records) would test the union mechanism better. Mining unionisation and abolition effects are extrapolations beyond the sample, and microdata on wages by worker type were not used.
Replicability: Data described but not public.