Has the end of Apartheid made South African labour 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.