Workers’ compensation, minimum wages, and moral hazard scope. Stylized considerations on a South African case

Viewing issues from the perspective of workers’ compensation, the article highlights how for some South African sectors the simultaneous provision of a minimum wage and a permanent disablement coverage increases moral hazard scope. From an economy-wide perspective this increasing scope means that employers (and society) not only pay too much to provide workers’ compensation, but are doing so at a mounting pace. The article considers some policy options that are overall not too drastic as regards the elimination of the increasing scope, and in so doing it also reminds us about the crucial importance of careful institutional design.