Education and Earnings in South Africa: An Application of the Mincerian Function

Abstract

The understanding of the interaction between education and income can never be exhausted, mainly because education remains the leading mechanism for upward social mobility. The argument is that people with higher levels of income are more likely to earn a higher income that those with lower level of education, that's the rule, although there maybe exceptions to the rule, the numbers for such cases are arguable small. However, there exists differences in the extent to which education influences income, earnings differentials exist by countries and social groups. This paper uses data published in 2017 by Statistics South Africa collected in the general household survey (GHS) which interviewed 72291 individuals across all the 9 provinces of the country. Using a mincerian function the paper estimates returns to education in South Africa. The results show that as expected, there is a positive relationship between education and earnings. The regression results also showed that based on the South African Household data, there is significant difference by race and gender. The results set a basis for reexamining the measurement of the variable used to capture education. The fact that a unit change in years of education is used needs to be changed so that different levels of education a weighted correctly.

Micro-analysis of earnings and its determinants in eastern cape province of South Africa

“…While this points to a clear evidence of gender-based earnings differentials with male individuals earning slightly more on average, this could have significant economic and societal implications, given the suspected gender-based earnings discrimination. This result is in agreement with Heywood and Parent (2017), Dunga and Mothibi (2019), Burger and Fourie (2019), as well as SALDRU (2021) where gender earnings gap was also reported in their separate studies in South Africa.…”

“…The theoretical underpinnings are highlighted as follow: Human Capital Theory: Human capital theory, developed by economists such as Gary Becker, posits that individuals' investments in education, training, skill development and health increase their productivity and earning potential. In the South African context, studies by Dunga and Mothibi (2019) emphasized the importance of education in wage earnings. They find that higher levels of education are associated with higher wages, but access to quality education remains unequal in today's contemporary society.…”

“…Studies conducted in South Africa and in particular, the Eastern Cape have all highlighted the national & the region's unique labor market outcomes. Researchers have examined factors such as unemployment rates, inequality, poverty, labor force participation, and underemployment (Dunga and Mothibi, 2019;Hill and Kohler, 2020;Redders, 2021;Olawuyi and Mushunje, 2023;Vaccaro et al, 2023;Wittenberg and Kerr, 2019). Understanding these outcomes is crucial for formulating policies that address the specific challenges faced by Eastern Cape residents in accessing quality employment opportunities.…”

“…Research on education in the Eastern Cape has examined issues such as school infrastructure, educational attainment, and the quality of education. These studies shed light on the relationship between education and wages within the region, emphasizing the need for equitable access to educational resources (Dunga and Mothibi, 2019). In addition, Eastern Cape experiences significant rural-urban migration, with individuals often seeking better economic opportunities in urban centers, and this migration pattern has implications for both rural and urban labor markets, including earnings differentials, employment prospects, and living conditions (Moyo et al, 2022).…”