Wage strategies and minimum wages in decentralized regions: The case of the clothing industry in Phuthaditjhaba, South Africa

During the apartheid era, many South Africans were forcibly relocated to 'b antustans' and other decentralized regions with little economic basis. The only manufacturing employment was provided by industries attracted to the a reas by selective incentives and low wages. After the transition to democra cy, the remaining incentives were removed and minimum wages were extended t o these (previously exempt) areas. This study of workers and managers in th e clothing industry in Phuthaditjhaba, the old capital of the QwaQwa homela nd, indicates that such developments may exacerbate unemployment and povert y in the region. Taiwanese export-oriented firms (the largest employers) ar e most threatened by the changes as they prefer to pay new employees low wa ges, and then increase them in Line with experience and productivity. Falli ng employment will translate directly into rising poverty as very little we lfare support is available for the unemployed in South Africa. Given that p eople (whether employed or unemployed) consistently rank increases in emplo yment over wage increases, this suggests that minimum wage determination sh ould be particularly sensitive to local conditions and potential employment losses.