Abstract
This study empirically examines the impact of education on earnings in South Africa, using the five-wave panel of the National Income Dynamics Study. An instrumental variable estimation approach using parental education was utilised. The findings of this study suggest that, generally, schooling has a significantly positive effect South Africa's earning outcomes. The evidence also suggests that returns on education are highest at tertiary level, followed by primary and secondary education. However, the impact of education differs along gender and race lines, implying the existence of inequality. The observed higher returns at higher levels of education suggest the need for equitable access to higher education across socio-economic groups. The key policy recommendation emanating from these findings is that the expansion of higher education, especially for Africans, should be geared towards contributing significantly to the reduction or eradication of the high levels of inequality in South Africa.