Education and Racial Inequality in Post-Apartheid South Africa

Has the end of Apartheid made South African labor markets meritocratic? This paper presents an analytical framework with testable hypotheses concerning equal opportunity. Using this framework and nationally representative panel data, it is demonstrated that while opportunities have been significantly equalized, as evidenced by an overall decline in the white-black wage differential, a new form of racial inequality has emerged, operating not directly on income as in the heyday of job reservation, influx control, and school segregation, but indirectly, through inequality in the rewards to effort, as witnessed by sharply divergent patterns in the returns to education between the races. Differences in the returns to education now account for about 40% of the White-African wage differential, whereas a decade ago this effect was virtually zero. One consequence of this trend is an incentive structure likely to impede or possibly even reverse gains made in the equalization of schooling attainment.