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Labour Market Racial Discrimination in South Africa Revisited

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  • Maciej Szelewicki
  • Joanna Tyrowicz

    ()
    (Faculty of Economic Sciences, University of Warsaw)

Abstract

Discrimination is a significant issue in labour market economics across developed as well as developing countries. In this paper, we inquire the actual size of wage discrimination in the Republic of South Africa, accounting for large differences in individual endowments. We apply the Oaxaca-Blinder decomposition as well as propensity score matching to adequately determine the role of discrimination in the wage gaps observed. Although the size of the absolute racial wage gap is enormous, amounting for more than 500%, the actual estimated effect non-attributable to other factors ranges between 45%-55%. This estimator, however, assumes homogenous discrimination across the wage distribution, while data suggest that there are significant educational, sectoral and occupational differentials. To account for these effects, we implement propensity score matching by finding “statistical twins” of the White population among the Black population, thus we demonstrate how wages differ between these groups in comparable labour market situations. Here too we find that wages for the White are on average approximately 30% higher, while the effects vary at quartiles of the wage distribution.

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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP18.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2009-08.

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Length: 20 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:war:wpaper:2009-08

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Keywords: discrimination; Oaxaca-Blinder decomposition; propensity score matching; Republic of South Africa; racial wage gap;

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  1. Servaas Van Der Berg & Megan Louw, 2004. "Changing Patterns Of South African Income Distribution: Towards Time Series Estimates Of Distribution And Poverty," South African Journal of Economics, Economic Society of South Africa, vol. 72(3), pages 546-572, 09.
  2. Van der Berg, Servaas & Louw, Megan & Burger, Ronelle, 2007. "Post-Apartheid South Africa: Poverty and Distribution Trends in an Era of Globalization," MPRA Paper 9065, University Library of Munich, Germany.
  3. Moll, Peter G., 1992. "Quality of education and the rise in returns to schooling in South Africa, 1975-1985," Economics of Education Review, Elsevier, vol. 11(1), pages 1-10, March.
  4. Rulof Burger & Rachel Jafta, 2006. "Returns to Race: Labour Market Discrimination in Post-Apartheid South Africa," Working Papers 04/2006, Stellenbosch University, Department of Economics.
  5. Doubell Chamberlain & Servaas van der Berg, 2002. "Earnings functions, labour market discrimination and quality of education in South Africa," Working Papers 02/2002, Stellenbosch University, Department of Economics.
  6. Murray Leibbrandt & Haroon Bhorat, 1999. "Modelling Vulnerability and Low Earnings in the South African Labour Market," Working Papers 99032, University of Cape Town, Development Policy Research Unit.
  7. Williams, Nicolas, 1991. "Reexamining the Wage, Tenure and Experience Relationship," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 512-17, August.
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