Education and Inequality: The South African Case

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Southern Africa Labour and Development Research Unit

Education and Inequality: The South African Case
by Nicola Branson, Julia Garlick, David Lam and Murray Leibbrandt

Working Paper Series Number 75

About the Author(s) and Acknowledgments Nicola Branson is a senior researcher at the Southern Africa Labour and Development Research Unit (SALDRU). Julia Garlick is a graduate student in Economics at Yale University. David Lam is Professor of Economics and Research Professor in the Population Studies Center at the University of Michigan. Murray Leibbrandt is a Professor of Economics and Director of SALDRU at the University of Cape Town. Support for this research was provided by the U.S. National Institute of Child Health and Human Devel opment (Grants R01HD39788 and R01HD045581), the Fogarty International Center of the U.S. National Institutes of Health (D43TW000657), the Andrew W. Mellon Foundation and the Centre for Development Enterprise. Murray Leibbrandt acknowledges the Research Chairs Initiative of the Department of Science and Technology and National Research Foundation for funding his work as the Research Chair in Poverty and Inequality.

Recommended citation Branson, N., Garlick, J., Lam, D., Leibbrandt, M. (2012). Education and Inequality: The South African Case. A Southern Africa Labour and Development Research Unit Working Paper Number 75. Cape Town: SALDRU, University of Cape Town

ISBN: 978-1-920517-16-8 © Southern Africa Labour and Development Research Unit, UCT, 2012 Working Papers can be downloaded in Adobe Acrobat format from www.saldru.uct.ac.za. Printed copies of Working Papers are available for R15.00 each plus vat and postage charges.

Orders may be directed to: The Administrative Officer, SALDRU, University of Cape Town, Private Bag, Rondebosch, 7701, Tel: (021) 650 5696, Fax: (021) 650 5697, Email: brenda.adams@uct.ac.za

Education and Inequality: The South African Case
Nicola Branson, Julia Garlick, David Lam and Murray Leibbrandt SALDRU Working Paper Number 75 University of Cape Town April 2012

Abstract
Following the international literature, income inequality decompositions on data from contemporary South Africa show that the labour market is the key driver of overall household inequality. In order to understand one of the channels driving this labour market inequality, we use national household survey data to review changing returns to education in the South African labour market over the last 15 years; with a focus on both the returns to getting employment as well as the earnings returns for those that have employment. We show that South Africa has experienced a skills twist with the returns to matric and postsecondary education rising and the returns to levels of education below this remaining constant. Then, based on a regression based decomposition of earnings inequality, we show how this has impacted earnings inequality. Indeed, the increase in returns to post-secondary education has directly counteracted the equalising gains that have been made by increased educational attainment, resulting in consistent levels of inequality over time.

1. Introduction
The need to invest in human capital has been recognised in development economics for a long time. While other fashions have come and gone the case for such investment has grown stronger over time. Increased globalization and the consequent changing international demand for labour patterns have strengthened this case in general but have changed it too. A dominant outcome of these patterns is that they have increased inequality within developing economies and a focus on inequality is an interesting and useful prism through which to view the contemporary case for investment in human capital in general and in South Africa specifically. Human capital typically includes both skills and health. These two aspects often have different causes and consequences, and both have extensive literature devoted to them. This paper will...
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