ECONOMIC GROWTH CENTER

                           YALE UNIVERSITY

                           P.O. Box 208269
                          27 Hillhouse Avenue
                       New Haven, CT 06520-8269


                    CENTER DISCUSSION PAPER NO. 776




                  LABOR UNIONS AND THE DISTRIBUTION OF
                  WAGES AND EMPLOYMENT IN SOUTH AFRICA





                             T. Paul Schultz
                             Yale University



                              Germano Mwabu
                                  WIDER



                              September 1997





 Note: Center Discussion Papers are preliminary materials circulated to
       stimulate discussions and critical comments.

       Financial Support was provided by The Rockefeller Foundation.

       We appreciate the comments of John Pencavel, Peter Moll, Harry Katz
       and three anonymous referees of The Industrial and Labor Relations
       Review, on an earlier draft of this paper, and the programming
       assistance of Paul McGuire.






                                Abstract

Labor unions are an important economic and political force in South Africa.
Inequality in wage rates is among the largest in the world in South Africa,
with African and white workers receiving wages that differ by a factor of
five.  The complex role of unions in closing and creating this wage gap is
assessed in this paper.  Union membership among Africa male workers
is shown to be associated in 1993 with their receiving wages that are 145
percent higher than comparable nonunion workers in the bottom decile of the
wage distribution, and 19 percent higher in the top decile of the wage
distribution.  Quantile regression estimates also indicate the returns to
observed productive characteristics of workers, such as education and
experience, are larger for nonunion than union workers.  If the large
union relative wage effect were reduced in half, we estimate employment of
African youth, age 16-29, would increase by two percentage points, and their
labor force participation rate would also increase substantially.












KEY WORDS: Labor Unions, Wages and Employment, South Africa