Earnings functions, labour market discrimination and quality of education in South Africa
AbstractEducation 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.
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Bibliographic InfoPaper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 02/2002.
Date of creation: 2002
Date of revision:
earnings functions; labour market; discrimination; education; South Africa;
Find related papers by JEL classification:
- I2 - Health, Education, and Welfare - - Education
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, and Immigrants; Non-labor Discrimination
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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