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Education and Inequality: The South African Case

Literature › Works

Nicola Branson; Julia Garlick; David Lam; Murray Leibbrandt (2012). Education and Inequality: The South African Case. SALDRU Working Paper Series, Number 75. Southern Africa Labour and Development Research Unit, University of Cape Town.
Type working paper
Scope Post-1994 South African economy
Method econometric
Period studied 1997–2007
Regions South Africa
Themes education human capital, inequality poverty unemployment, labour markets wages, transition post apartheid, methods data sources
Citation key branson2012

Argument

Earnings inequality in post-apartheid South Africa has stayed high and roughly constant over 1997-2007 because two forces offset each other. Rising African schooling, much of it completed before 1994, tended to equalise earnings. At the same time a 'skills twist' raised the labour-market returns to matric and especially post-secondary education, and this tended to widen inequality. The authors show this with yearly OLS earnings regressions, variance-of-log-earnings decompositions and counterfactual simulations, with and without the unemployed counted as zero earners. They conclude that more years of schooling are not enough, and that school quality, access to post-secondary education and early-childhood investment must be addressed.

Evidence and method

Statistics South Africa October Household Surveys 1997-1999 and September Labour Force Surveys 2000-2007. Samples are men and women aged 25-59, about 40,000 observations a year, with cross-entropy weights (Branson 2010). Measures used are the standard deviation of log earnings, Theil's L and Gini coefficients, plus OLS earnings regressions (Table A1). The international and South African literature is reviewed.

Findings

  • Abstract states that returns to matric and post-secondary education have risen while returns to lower education levels were constant. The conclusion states they fell sharply. (p. 3)

    South Africa has experienced a skills twist with the returns to matric and post-secondary education rising and the returns to levels of education below this remaining constant.

  • Household income inequality is driven mainly by labour-market outcomes (citing Leibbrandt et al. 2010). (p. 7)

    the relative success (or lack thereof) of household members in the labour market is the dominant driver of their position in the household income distribution.

  • Unemployment accounts for most earnings inequality (Tregenna 2009, cited). (p. 7)

    finds that the vast majority of earnings inequality can be attributed to the rate of unemployment.

  • Large racial gaps in schooling persisted in 1997, with most Africans having less than nine years of schooling. (p. 9)

    while almost 60% of African men and women had less than nine years of schooling in 1997

  • The premium for post-secondary schooling among African men rose sharply between 1997 and 2007. (p. 10)

    African men with two years of post-secondary schooling have earnings that are 40% higher than African men with grade 12 in 1997 and 70% higher in 2007.

  • Post-secondary education strongly raises the probability of employment for Africans. (p. 10)

    African males with a diploma or degree are close to 20 percentage points more likely to be employed than African males with grade 7.

  • Aggregate earnings inequality measures were stable over the decade. (p. 10)

    there has been very little change in inequality over the period.

  • Counterfactual: improved schooling distribution alone would have lowered earnings inequality by about 6%. (p. 12)

    the improvements in the schooling distribution would have caused a 6% decline in the log variance of earnings

  • Racial premia matter more when the unemployed are included as zero earners, so earner-only analysis understates them. (p. 12)

    increased earnings premia for whites, coloured and Indians relative to Africans was one important component in the analysis that included the unemployed.

  • The discussion section says the skills twist directly counteracted gains in secondary schooling. (p. 13)

    South Africa has experienced a skills twist with the returns to matric and post-secondary education rising and the returns to levels of education below matric falling sharply.

  • School quality explains much of the apparent racial discrimination in earnings. (p. 14)

    Chamberlain and van der Berg (2002) show that controlling for school quality removes a great deal of this discrimination.

  • Few matriculants proceed to post-secondary study, a blockage relevant to inequality. (p. 15)

    80 percent of students who passed the senior certificate in 2002-2004 did not continue on to post-secondary institutions in the year after completing school.