WP10/2006

Wage trends in post-apartheid South Africa: Constructing an earnings series from household survey data

Stellenbosch Working Paper Series No. WP10/2006

Author(s): Rulof Burger, Derek Yu

JEL Classification: J31

Keywords: South Africa, Earnings, Wages, Labour market trends

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Abstract:

This paper examines South African wage earnings trends using all the available post-1994 household survey datasets. This allows us to identify and address the sources of data inconsistencies across surveys in order to construct a more comparable earnings time series. Taking account of the inconsistencies in questionnaire design and the presence of outliers, we find that it is possible to construct a fairly stable earnings series for formal sector employees. We find that claims that workers have on average experienced a substantial decrease in their real wage earnings in the post-apartheid era is based on choosing datasets on either side of Statistics South Africa’s changeover from October Household Surveys (OHS) to the more consistent Labour Force Surveys (LFS), which caused a discontinuous and inexplicably large drop in average earnings. The data actually show an increase in real wage earnings in the post-transition period for formal sector employees, and does not appear to provide strong evidence of decreasing wages in the informal economy. The paper also investigates the change in the distribution of earnings, as well as mean earnings trends by population group, gender and skill category.