ECONOMIC GROWTH CENTER

                        YALE UNIVERSITY

                        P.O. Box 208269
                      27 Hillhouse Avenue
                    New Haven, CT 06520-8269


                CENTER DISCUSSION PAPER NO.  785



            WAGE PREMIA FOR EDUCATION AND LOCATION,
               BY GENDER AND RACE IN SOUTH AFRICA
                                


                        T.  Paul Schultz
                        Yale University
                                
                                
                         Germano Mwabu
                     University of Nairobi
                                
                                
                                
                         February 1998




Note: Center Discussion Papers are preliminary materials circulated to
      stimulate discussions and critical comments.  This is a revised
      version of the paper originally written in May 1995.

      Financial support was provided by the Rockefeller Foundation.

      We have benefited from the comments of Martha Ainsworth, Harold
      Alderman, Michael Lipton, Peter Moll, Duncan Thomas and participants
      of the ESPE meetings in Lisbon, June 2, 1995 and the Northeast
      Development Conference at Harvard.  We appreciate the computing
      assistance of Paul McGuire.  




                             ABSTRACT

Despite the lower quality of education provided Africans compared with
whites in South Africa, the percentage wage gains associated with additional
years of primary, secondary, and higher education are substantially larger
for Africans than for whites in 1993, and they increase for both race groups
at higher levels of education.  The lower quantity (or political quotas) of
education received by Africans than whites is a simple explanation for the
wage structure documented in this paper.  The other two racial groups,
colored (mixed races) and Indians, occupy intermediate positions between
whites and Africans in terms of both the quantity of education received 
and wage returns to those levels of education.  As barriers to employment
by race are dismantled in South Africa, wage differences
between races are likely to diminish, while wage differences within
race groups may well widen.  Quantitative expansion of educational  
opportunities for nonwhites at the secondary and higher education levels 
seems to be overdue.



Keywords:     Wage Structure, Educational Quotas, Returns to Education, South Africa

JEL Classification:     J31, I21, H52