Title of paper

The Role of Over-education on Wage Determination in South Africa’s Labor Markets

Presenter's country

United States

Start Date

16-8-2014 9:00 AM

End Date

16-8-2014 10:30 AM

Submission type

Presentation

Abstract

This paper tests for the presence of over-education and its effects on wage determination amongst South Africa’s racial demographic groups. This study is an attempt to examine if over-education offers some insight in explaining the persistently high wage differentials that have plagued South Africa’s labor markets for some decades now. Using the mean/mode theory, and a multinomial logistic regression, we find that while whites remained over-educated both pre- and post-apartheid; blacks were under-educated in both eras. We then use an Over-Required-Under specification regression, corrected for sample selection bias, to test for the effects of over-education on earnings. Our results show that unlike our earlier beliefs, it is the lack of over-education amongst the blacks, and not its presence that is responsible for the huge wage differentials in South Africa. Blacks are hugely penalized for being under-educated, whilst whites are mostly rewarded for being over-educated.

Keywords

South Africa

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Aug 16th, 9:00 AM Aug 16th, 10:30 AM

The Role of Over-education on Wage Determination in South Africa’s Labor Markets

This paper tests for the presence of over-education and its effects on wage determination amongst South Africa’s racial demographic groups. This study is an attempt to examine if over-education offers some insight in explaining the persistently high wage differentials that have plagued South Africa’s labor markets for some decades now. Using the mean/mode theory, and a multinomial logistic regression, we find that while whites remained over-educated both pre- and post-apartheid; blacks were under-educated in both eras. We then use an Over-Required-Under specification regression, corrected for sample selection bias, to test for the effects of over-education on earnings. Our results show that unlike our earlier beliefs, it is the lack of over-education amongst the blacks, and not its presence that is responsible for the huge wage differentials in South Africa. Blacks are hugely penalized for being under-educated, whilst whites are mostly rewarded for being over-educated.