The Minimum Wage and Firm Networks: Evidence from South Africa


Brandon Joel Tan. Working Paper. “The Minimum Wage and Firm Networks: Evidence from South Africa.” United Nations WIDER Working Paper. Publisher's Version


There is a large literature on the minimum wage focused on directly exposed firms and geographies. This paper provides new evidence that the minimum wage has significant spillover effects on firms exposed to the minimum wage indirectly via firm supply chains. Using administrative firm-level tax data from South Africa, we study the impact of the 50\% agricultural minimum wage hike in 2013 on the outcomes of firms downstream from the agriculture sector with an event study design. The minimum wage increased labor costs and  prices in the agriculture sector. We find that industries with greater upstream exposure to the agriculture sector experienced greater decreases in assets, sales and employment for its medium to large firms following the minimum wage increase. 
Last updated on 07/09/2021