More Diplomas, Same Divide: Why Education Gains Didn’t Shrink South Africa’s Income Gap

After apartheid, South Africa sharply reduced inequality in schooling, with many more people completing secondary education. But rising rewards for university degrees and falling relative earnings for those with incomplete secondary education kept income inequality stubbornly high.

When apartheid ended in 1994, South Africa faced enormous inequality in both schooling and income. Over the next 25 years, the country made real progress in education. More children stayed in school, more adults completed secondary education, and the average number of years of schooling rose steadily. The share of adults with very low levels of education fell sharply, while the number of adults who finished Grade 12 more than doubled.

By standard measures, education became far more equal. The gap in years of schooling between the least and most educated narrowed significantly. On paper, this looked like a powerful step toward a fairer society. Since education strongly influences income, many expected earnings inequality to fall as well.

But that is not what happened.

The Income Gap Refused to Shrink

Despite major gains in schooling, income inequality remained stubbornly high. South Africa continues to rank among the most unequal countries in the world. Measures such as the Gini coefficient and other inequality indicators show that earnings did not improve in the same way education did.

This created a puzzle. If more people are better educated, why are incomes still so unequal? A new study by economists David Lam of the University of Michigan and the National Bureau of Economic Research, Murray Leibbrandt and Nicola Branson of the University of Cape Town, and Arden J. Finn of the World Bank set out to answer that question.

Their research shows that the answer lies not just in how much education people have, but in how the labor market rewards it.

The Rising Value of a University Degree

Education affects income in two main ways. First, there is how education is distributed across the population. Second, there is how much each level of education pays. South Africa improved first, but the second changed in a way that increased inequality.

After the mid-1990s, the earnings advantage of university graduates rose sharply. People with post-secondary qualifications pulled further ahead of the national average. In some cases, university-educated workers earned nearly six times the average income by 2019, compared to less than three times in the late 1990s.

In simple terms, higher education became much more valuable. This pushed top earners further away from the middle.

When the rewards at the top grow quickly, inequality widens, even if more people are finishing school overall.

The Squeeze in the Middle

At the same time, workers with incomplete secondary education, roughly Grades 8 to 11, saw their relative earnings fall. In the late 1990s, someone with about ten years of schooling could earn close to the national average. By 2019, the same level of education often placed them well below the average.

This mattered because a large share of South Africans fall into this middle group. As their earnings slipped compared to the national mean, inequality increased.

So South Africa faced a double effect: university graduates surged ahead, while many in the middle lost ground. Together, these two shifts were powerful enough to cancel out the equalizing effect of better schooling distribution.

The researchers ran simulations to test this. They found that if the rewards for each education level had stayed the same as they were in the late 1990s, the improvements in schooling alone would have reduced income inequality significantly by 2019. Instead, changes in wages offset those gains.

What This Means for South Africa

The findings offer an important lesson. Expanding education is essential, but it does not automatically reduce income inequality. The structure of the labor market matters just as much as the number of years people spend in school.

South Africa’s progress in education was real and meaningful. Millions gained better access to schooling, and inequality in years of education fell steadily. But the economy increasingly rewarded higher education while offering weaker returns to those who stopped short of university.

This shows that solving inequality requires more than improving access to classrooms. It also requires creating jobs that value a wider range of skills and qualifications. Without changes in how the economy rewards workers, education alone cannot close the income gap.

Three decades after apartheid, South Africa has narrowed its education divide. The challenge now is to ensure that those gains translate into shared economic opportunity.