Earnings functions, labour market discrimination and quality of education in South Africa
Stellenbosch Working Paper Series No. WP02/2002Publication date: 2002
Author(s):
[protected email address] (Department of Economics, Stellenbosch University)
Education is a key determinant of earnings, as several South African studies have confirmed. Years of schooling completed, however, provides an imperfect approximation of the effective level of education achieved, mainly due to variations in the quality of education received. This study addresses this issue by, for the first time in South Africa, incorporating quality of education in the modelling of earnings. Differences in quality of education are viewed as a form of pre-labour market discrimination. By decomposing the wage gap before and after controlling for educational quality, more accurate estimates of the true levels of labour market discrimination are obtained. The main hypothesis tested is that controlling for quality will reduce the component of the wage gap ascribed to labour market discrimination. The results show a systematic decrease in the labour market discrimination component with increased adjustments for quality of education. Almost half of the previous labour market discrimination can be explained by differences in quality, yet the proportion of racial wage differentials ascribed to labour market discrimination is still found to be significant. The clear implication is that current estimates of labour market discrimination are exaggerated and a more careful analysis of earnings is required to re-assess the levels of discrimination in the South African labour market.
JEL Classification:I2, J15, J3
Keywords:earnings functions, labour market, discrimination, education, South Africa
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Monday 28 July 202512:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
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Prof Willem Boshoff: Stellenbosch University
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
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Professor Johan Fourie: Stellenbosch University
Topic: "Economic History: TBC"
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18 Jul 2025 Encouraging data, but messy politics while US tariff deadline loomsThe big global data prints of the week came on Tuesday, with better-than-expected Chinese GDP growth for Q2 and US core CPI coming in lower than expected, but still (finally) reflecting some signs of tariffs being passed on to consumers. Locally, the uptick in mining production and retail sales was positive for Q2 GDP dynamics. In addition to the data,...
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