Education, Inequality and Economic Mobility in South Africa

This study of the relation between education and earnings in South Africa in 1993 concludes that the private labor-market rate of return to investment in primary and secondary education for Africans is about 15 to 21%. This figure is about half the average for sub-Saharan Africa and does not reflect a large absolute effect of schooling on earnings so much as a very low labor-market opportunity cost, which cost is depressed by widespread youth unemployment. The decision to drop out after only a few years of school may be economically justifiable for students from poor families, who, out of necessity, are constrained by short time horizons. Policies designed to lower the direct costs of education may have little effect on the poorest households. As a result, it may prove quite difficult to achieve a more equal distribution of educational capital. Furthermore, log expected earnings are convex in years of schooling, with the implication that even if schooling does become more equally distributed, increases in mean educational attainment for Africans are likely to be associated with greater economic inequality among Africans (but less inequality between the races)