Using data sets that only became available in recent years, researchers at Binghamton University, State University of New York analyzed the wage impact of cognitive skills in South Africa.

How much of those wage gains come from schooling, and how much from cognitive abilities developed long before the student sets foot in a classroom?

Data on measures of cognitive performance have been limited historically, particularly in developing countries. Using data sets that only became available in recent years, Binghamton University Assistant Professor of Economics Plamen Nikolov, and graduate students, Nusrat Jimi and Jerray Chang, analyzed the wage impact of cognitive skills in «The Importance of Cognitive Domains and the Returns to Schooling in South Africa: Evidence of Two Labor Surveys» in the August 2020 edition of Labour Economics.

Economics research dating back to the 1970s links higher wages to more education; however, it wasn’t until the 1990s that economists made headway in designing research that could tease out the true causes of such phenomena rather than just the correlation, Nikolov explained.

If non-experimental studies that explore the effects of education on wages don’t account for cognitive performance in addition to schooling, the wage effect of school alone will seem higher than it really is, he pointed out. While cognitive skills may be further developed in the classroom, previous economics and psychology research shows that most of these skills are developed before people start elementary school.

In addition to the innate cognitive factor, the quality of education can also impact wages. During the Apartheid period, schools in South Africa were race-based, with those of worse quality attended by Black South Africans; this system was dismantled in 1994, although disparities remain. Black South Africans often had substantially less education than their white counterparts as a result.

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Materials provided by Binghamton University. Original written by Jennifer Micale. Note: Content may be edited for style and length.