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How did labour market racial discrimination evolve after the end of apartheid? An analysis of the evolution of employment, occupational and wage discrimination in South Africa between 1993 and 1999

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Sandrine Rospabé (2002). How did labour market racial discrimination evolve after the end of apartheid? An analysis of the evolution of employment, occupational and wage discrimination in South Africa between 1993 and 1999.
Type working paper
Scope Post-1994 South African economy
Method econometric
Period studied 1993–1999
Regions South Africa
Themes labour markets wages, inequality poverty unemployment, transition post apartheid, education human capital, unions strikes, methods data sources
Citation key rospabe2002

Argument

The paper estimates how much of the White/African gaps in employment, access to high-skilled jobs and hourly earnings is due to labour market discrimination rather than differences in productive characteristics. It adapts the Oaxaca-Neumark residual decomposition (probit for employment and occupation, interval regression for wages) to African and White male samples from the 1993 PSLSD and the 1999 OHS. Discrimination, measured as the unexplained residual, accounts for roughly 30-40% of the gaps. Between 1993 and 1999 employment discrimination fell slightly, while occupational and wage discrimination rose slightly. Most of the gaps are explained by human capital and location differences, which themselves partly reflect apartheid-era pre-market discrimination.

Evidence and method

Own econometric computations from the 1993 Project for Statistics on Living Standards and Development (PSLSD) and the 1999 October Household Survey (OHS). Samples are African and White males aged 16-65 (n=16,750 for employment, 9,361 for occupation, 8,117 for earnings in 1999). Supplemented by secondary literature (Moll, Kingdon and Knight, Erichsen and Wakeford, Frijters).

Findings

  • Discrimination (the unexplained residual) accounts for 30-40% of racial gaps, with only employment discrimination falling between 1993 and 1999. (p. 1)

    nowadays discrimination account for between 30 per cent and 40 per cent of the racial gaps, depending on the type of inequality regarded.

  • Unemployment was extremely unequal by race in 1999. (p. 5)

    South Africa suffers from one of the highest unemployment rate in the world, 36.2% in 1999 by the broad definition

  • African male employment rose slightly and White employment fell, narrowing the gap. (p. 10)

    a decrease in the White employment rate from 95.5% to 93.5% and an increase in the African employment rate from 61.5% to 62.7%.

  • Employment discrimination share of the gap declined marginally, though not statistically tested. (p. 12)

    While it accounted for 33% of the racial employment gap in 1993, it contributed 30% to this gap in 1999

  • Occupational segregation remained stark in 1999. (p. 13)

    In 1999, only 12% of African wage earners had access to highly skilled occupations whereas 54% of Whites were on the top of the hierarchical ladder

  • Occupational discrimination rose slightly even as more Africans entered high-skilled jobs. (p. 18)

    racial discrimination in the access to the high-skilled jobs slightly increased between 1993 and 1999.

  • Only African workers receive a significant union wage premium, indicating union bargaining power over African wages. (p. 23)

    Only African union members earn significantly more than non-union members do. There is no evidence of union wage premium for White workers.

  • The relative improvement in African earnings came from African productive characteristics, not falling wage discrimination. (p. 25)

    African log hourly earnings increase from 1.45 in 1993 up to 1.74 in 1999, whereas White earnings remain roughly stable.

  • Wage discrimination share of the earnings gap increased between 1993 and 1999. (p. 25)

    results underline a slight increase in this component of the White/African earnings gap, from 23% to 28.5%

  • Human capital differences are the main driver of inequality, pointing to long-run education policy. (p. 26)

    differences in productive characteristics between White and African workers account for the largest part of the differentials, between 65% and 80%