1 Introduction
This study investigates the relationship between educational qualifications and income in New Zealand over the period 1981 to 1996. Reducing disparities between Maori and non-Maori New Zealanders in average income is an important and ongoing focus of government policy. This study builds on Maani (2000) by looking at how ethnic differences in the relationship in 1986 and 1996 are mediated by occupation, industry, hours of work, and locality[1].
Over the decade since the mid-1980s those with higher education, skills and training have had a relative increase in employment opportunities, reflected in higher employment rates in occupations and industries which have experienced growth, and higher hours of work and hourly wages. In particular, Maori have been more heavily concentrated in elementary and low skilled jobs, which did not experience growth to the extent that professional and other skill-based occupations have in the past decade[2]. In addition, other studies (Chapple and Rea, 1999) suggest that Maori in rural locations are more disadvantaged in employment outcomes than any other group.
Maani (2000) found that in both 1986 and 1996, Maori had lower qualifications than non-Maori and that, for given qualifications; Maori incomes were lower than non-Maori. However, returns to education were higher for Maori than non-Maori. This study investigates the extent to which these differences are associated with differences in occupation, industry, hours of work, and locality, focussing on all employed persons. It also decomposes the mean income gap across ethnic groups into effects due to differences in the characteristics of the groups, and effects due to differences in the way in which these characteristics are translated into income (after Oaxaca, 1973; and Oaxaca and Ransom, 1999).
The remainder of this paper is organised as follows. The next section provides a description of the data, and group characteristics. Section 3 sets out the methodology for estimation of rates of return to education. Section 4 reports results of these. Section 5 reports decompositions of ethnic differences in income. Section 6 concludes.
Notes
- [1]This work is part of a vast and growing international literature on the effects of educational investments on income (see for example, Miller (1982), Chapman (1988), McNabb and Richardson (1989) for Australia; Hunt and Hicks (1985), Maani (1996, 1997, 1999 and 2000), Gibson (1988) and Dixon (1988) for New Zealand). The analysis of changes in rates of return to education over time has been pursued by Miller (1984), Chia (1991), and Gregory (1996) for Australia. Borland (1999) has provided a recent and comprehensive survey of analyses on changes in the income distribution in Australia and the contribution of educational attainment and earnings to it. For New Zealand Maani (1997, 1999) has examined the returns to post-compulsory education across four census years; and Ryoo (1988), Behrman and Birdsall (1987), Wilson (1985), and Psacharopoulos (1994) provide international evidence on this question.
- [2]Winkelmann and Winkelmann (1998). Neville and Saunders (1988) investigate similar effects of ethnic differences in occupation and industry in Australia.. Hertzog (1997) also investigates ethnic differences in employment outcomes in New Zealand, and finds them to be associated with differences in the rate of involuntary job separations.
