Human Capital and Inequality: The South African Case

Murray Leibbrandt, University of Cape Town
David Lam, University of Michigan
Julia Garlick, Yale University

Following the international literature, decomposition analyses of inequality in contemporary South Africa show that the labour market is the key driver of overall household inequality. Given this, the paper goes on to use national 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 post-secondary education rising and the returns to levels of education below matric falling sharply. Based on a regression based decomposition of earnings inequality, we show that this has had a major impact on earnings inequality. Indeed the fall in returns to education has directly counteracted the gains that have been made in increased years of secondary schooling.