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Labour Market Racial Discrimination in South Africa Revisited

Author

Listed:
  • Maciej Szelewicki
  • Joanna Tyrowicz

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

Discrimination is a significant issue in labour market economics across developed as well as developing countries. In this paper, we inquire the actual size of wage discrimination in the Republic of South Africa, accounting for large differences in individual endowments. We apply the Oaxaca-Blinder decomposition as well as propensity score matching to adequately determine the role of discrimination in the wage gaps observed. Although the size of the absolute racial wage gap is enormous, amounting for more than 500%, the actual estimated effect non-attributable to other factors ranges between 45%-55%. This estimator, however, assumes homogenous discrimination across the wage distribution, while data suggest that there are significant educational, sectoral and occupational differentials. To account for these effects, we implement propensity score matching by finding “statistical twins” of the White population among the Black population, thus we demonstrate how wages differ between these groups in comparable labour market situations. Here too we find that wages for the White are on average approximately 30% higher, while the effects vary at quartiles of the wage distribution.

Suggested Citation

  • Maciej Szelewicki & Joanna Tyrowicz, 2009. "Labour Market Racial Discrimination in South Africa Revisited," Working Papers 2009-08, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2009-08
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    References listed on IDEAS

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    1. Moll, Peter G., 1992. "Quality of education and the rise in returns to schooling in South Africa, 1975-1985," Economics of Education Review, Elsevier, vol. 11(1), pages 1-10, March.
    2. Murray Leibbrandt & Haroon Bhorat, 1999. "Modelling Vulnerability and Low Earnings in the South African Labour Market," Working Papers 99032, University of Cape Town, Development Policy Research Unit.
    3. Rosa Dias & Dorrit Posel, 2007. "Unemployment, Education and Skills Constraints in Post-Apartheid South Africa," Working Papers 07120, University of Cape Town, Development Policy Research Unit.
    4. Servaas van der Berg & Ronelle Burger & Megan Louw, 2007. "Post-Apartheid South Africa: Poverty and Distribution Trends in an Era of Globalization," WIDER Working Paper Series RP2007-57, World Institute for Development Economic Research (UNU-WIDER).
    5. Doubell Chamberlain & Servaas van der Berg, 2002. "Earnings functions, labour market discrimination and quality of education in South Africa," Working Papers 02/2002, Stellenbosch University, Department of Economics.
    6. Servaas Van Der Berg & Megan Louw, 2004. "Changing Patterns Of South African Income Distribution: Towards Time Series Estimates Of Distribution And Poverty1," South African Journal of Economics, Economic Society of South Africa, vol. 72(3), pages 546-572, September.
    7. Paul Allanson & Jonathan P. Atkins & Timothy Hinks, 2002. "No End to the Racial Wage Hierarchy in South Africa?," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 442-459, October.
    8. Dale T. Mortensen, 2005. "Wage Dispersion: Why Are Similar Workers Paid Differently?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633191, April.
    9. Rulof Burger & Rachel Jafta, 2006. "Returns to Race: Labour Market Discrimination in Post-Apartheid South Africa," Working Papers 04/2006, Stellenbosch University, Department of Economics.
    10. Williams, Nicolas, 1991. "Reexamining the Wage, Tenure and Experience Relationship," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 512-517, August.
    11. repec:bla:rdevec:v:6:y:2002:i:3:p:442-59 is not listed on IDEAS
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    Cited by:

    1. Sue Ledwith & Janet Munakamwe, 2015. "Gender, union leadership and collective bargaining: Brazil and South Africa," The Economic and Labour Relations Review, , vol. 26(3), pages 411-429, September.
    2. Rulof Burger & Rachel Jafta & Dieter von Fintel, 2016. "Affirmative action policies and the evolution of post-apartheid South Africa's racial wage gap," WIDER Working Paper Series wp-2016-66, World Institute for Development Economic Research (UNU-WIDER).
    3. Rulof Burger & Rachel Jafta & Dieter von Fintel, 2016. "Affirmative action policies and the evolution of post-apartheid South Africa's racial wage gap," WIDER Working Paper Series 066, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    discrimination; Oaxaca-Blinder decomposition; propensity score matching; Republic of South Africa; racial wage gap;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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