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
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.