Estimating returns to education and experience in the South African agricultural industry

Thesis (MCom)--Stellenbosch University, 2021.ENGLISH SUMMARY : Education is an important tool for economic growth and eradicating poverty. As the topic of returns to education has been researched extensively in South Africa, this study followed a slightly different direction. Literature determining the returns to education and experience in specific industries is scarce in South Africa. An increase in capital investments or supply of factor inputs creates an increase in the demand for skilled workers over time as an economy develops (Bhorat and Hodge, 1999). The primary objective of this study was to determine the returns to education and experience for the agricultural labour force using Mincer’s earnings functions. The objective of Mincer’s equation is to quantify returns to education and experience received by an individual for each additional year of education and experience in the workforce completed. The Mincer equations also have the capacity to include additional background and individual characteristics into the model, determining the influence these may have on earnings. The returns to education and experience for workers employed in the agricultural industry were analysed and compared to those in the mining and manufacturing sectors. To this end the level of education and experience of individuals, together with other factors that influence the monthly earnings, were considered. This study made use of the data provided by the Post-Apartheid Labour Market Series between the years of 2010 and 2017. If compared to other studies on the returns to education and experience in South Africa, this study is novel, since it both distinguishes between the industries in which individuals are employed and the skill levels at which they are employed. The main analysis in this study is based on the Ordinary Least Squares regression of the adjusted Mincer equation. Besides the standard regressors in the equation – education and experience – other dummy variables were included such as gender, union membership, marital status, and area type. Fixed effects were also included in the model for the period analysed in the study – 2010 to 2017 – and provincial fixed effects, to determine the impact of an individual’s location on wages. The findings are, firstly, that entry-level workers in the agricultural industry receive the lowest returns to education. A possible reason for this observation is that agricultural workers do not require more than basic education to complete simple and frequent tasks. Secondly, professional agricultural workers gain the highest returns to education compared to their peers in mining and manufacturing. Thus, higher levels of education lead to higher returns. Thirdly, female workers in the agricultural sector earn considerably lower monthly wages compared to males, regardless of their level of skill. The estimates of the additional variables included are in line with other studies analysing returns to education. Positive returns on education in the agricultural industry prove that there are gains to be had if there is an increase in educational attainment. These results provide policy makers with insight into where to invest, while pertinently considering that female education is more profitable and that more educational opportunities be provided for workers in the rural areas.AFRIKAANSE OPSOMMING : Opvoeding is ʼn belangrike instrument vir ekonomiese groei en die uitwissing van armoede. Aangesien die onderwerp van voordeele aan onderwys breedvoerig in Suid-Afrika nagevors is, is die fokus van hierdie studie effens anders. Literatuur wat die voordeele aan onderwys en ervaring in spesifieke bedrywe bepaal, is skaars in Suid-Afrika. 'n Toename in kapitaalbeleggings van die aanbod van faktor-insette lei mettertyd tot 'n toename in die vraag na geskoolde werkers namate 'n ekonomie ontwikkel (Bhorat en Hodge, 1999). Die primêre doel van hierdie studie was om die voordeele aan onderwys sowel as ervaring in die landbou-arbeidsmag te bepaal met behulp van Mincer se verdienste-funksies. Die doel van Mincer se verdienste-funksies is om die voordeel wat individue uit onderwys en ervaring trek, te kwantifiseer vir elke addisionele jaar van onderwys en ervaring wat in die werksmag voltooi is. Die Mincer verdienste-funksies het ook die vermoë om addisionele agtergrond en individuele eienskappe in die model in te sluit, om sodoende die invloed wat dit op verdienste mag hê, bepaal. Die voordeele aan opleiding en ervaring van werkers in die landboubedryf is ontleed en vergelyk met dié in die mynbou- en vervaardigingsektor. Vir hierdie doel is die opvoedings- en ervaringsvlak van individue in ag geneem, tesame met ander faktore wat maandelikse verdienste beïnvloed. Hierdie studie het gebruik gemaak van die data voorsien deur die Post Apartheid Arbeidsmark Reeks tussen 2010 en 2017. Wanneer dit vergelyk word met ander studies oor die voordeel van onderwys en ervaring in Suid-Afrika, is hierdie studie nuut, omdat dit beide onderskei tussen die bedryf waarin individue in diens is, en die vaardigheidsvlakke waarop hulle werksaam was. Die hoof-ontleding in hierdie studie is gebaseer op die Ordinary Least Squares regressie van die aangepaste Mincer vergelyking. Afgesien van die standaard-regressors in die vergelyking – opvoeding en ervaring – is ander dummy-veranderlikes ingesluit, soos geslag, vakbond- lidmaatskap, huwelikstatus, en gebiedstipe. Vaste effekte vir provinsies is ook ingesluit in die model in die tydperk wat in die studie ontleed is (2010 tot 2017), om die impak wat 'n individu se ligging op lone het, te bepaal. Die bevindings is, eerstens, dat intreevlak-werkers in die landboubedryf die laagste lone vir hul opleiding ontvang, dus die laagste voordeele aan opleiding. 'n Moontlike rede vir hierdie waarneming, is dat landbouwerkers nie meer as basiese opleiding benodig om eenvoudige en gereelde take te voltooi nie. Tweedens, professionele landbouwerkers ontvang die hoogste voordeele aan opleiding in vergelyking met hul eweknieë in mynbou en vervaardiging. Hoër onderwysvlakke lei dus tot hoër opbrengste. Derdens, vroulike werkers in die landbousektor verdien aansienlik laer maandelikse lone vergeleke met mans, ongeag hul vaardigheid. Die beramings van die addisionele veranderlikes wat hierby ingesluit is, stem ooreen met ander studies wat die voordeele aan opleiding ontleed. Positiewe voordeele aan onderwys in die landboubedryf bewys dat 'n toename in opvoedkundige prestasies kan lei tot ʼn toename in wins. Hierdie bevindinge bied beleidmakers insig oor waar hulle moet belê, terwyl pertinent in ag geneem moet word dat vroulike opleiding meer winsgewend is en dat meer opvoedkundige geleenthede vir werkers in landelike gebiede voorsien moet word.Master