Measuring inequality of opportunity in South Africa

Includes bibliographical references.This paper examines the effect of circumstances on the opportunities available to individuals in South Africa, by quantifying the degree to which inequalities in labour market outcomes are due to circumstances (unequal opportunities). To do so, two distinct Inequality of Opportunity indices are applied to the first wave of the National Income Dynamic Study (NIDS). The dissimilarity index estimates the opportunities that need to be reallocated, for all economically active South Africans to have equal access to employment in spite of their circumstances. Whereas the inequality of economic opportunity index, estimates the (lower bound) share of total income inequality that can be attributed to differing circumstances. Results from the empirical analyses reveal that circumstances, such as race, gender and parental education, do not contribute significantly to inequalities in accessing employment. This is in contrast to the substantial share of labour market income inequality, found to stem from circumstances. These results suggest that policies aimed at redressing inequities in the labour market, should focus on the channels through which circumstances, especially race and gender impact an individual’s opportunities and thus their ability to acquire labour market income