1. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14- 15, 2010 1 “Its not that I’m a rascist, its that they are Roma”: Roma discrimination & returns to education in South Eastern Europe Niall O’Higgins Università di Salerno

2. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20102Presentation Overview/Goal of the Analysis Overview/Goal of the Analysis Data Data A few observations concerning the Roma in the Labour Market in SEE A few observations concerning the Roma in the Labour Market in SEE Estimation of: Estimation of: Level of education Level of education Probability of Employment Probability of Employment Returns to education Returns to education Simulation of the effects of policy Simulation of the effects of policy Concluding remarks Concluding remarks

3. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14- 15, 2010 3Overview/Goal Roma did very badly out of transition in terms of Labour market outcomes – i.e. wages/incomes and employment in SEE – Question is why? Roma did very badly out of transition in terms of Labour market outcomes – i.e. wages/incomes and employment in SEE – Question is why? Two main explanations offered: Two main explanations offered: Low Education levels Low Education levels Labour Market Discrimination Labour Market Discrimination N.B. Two explanations are not actually mutually exclusive N.B. Two explanations are not actually mutually exclusive Analysis seeks to throw light on the relative importance of these two explanations and draws the connection between them Analysis seeks to throw light on the relative importance of these two explanations and draws the connection between them

4. Data UNDP survey of Roma, Majority (& IDP) populations in – at the time - 9 territorial areas of SEE (Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Romania and Serbia) in – at the time - 9 territorial areas of SEE (Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Romania and Serbia) Not representative samples – emphasis on collecting information on Roma & Majority populations living in “similar circumstances” Not representative samples – emphasis on collecting information on Roma & Majority populations living in “similar circumstances” So lets have a look at the Roma situation So lets have a look at the Roma situation Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20104

5. Unemployment rates are universally much higher for Roma than majority populations…. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20105

6. And informal employment is much higher amongst the Roma… Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20106

7. And monthly wages much lower… (National Median male wage=100) Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20107

8. A Glance at Explanations 1. Low education 2. Discrimination 3. Interaction between Education & Discrimination based explanations – the returns to education Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20108

9. Education – Roma clearly have much lower levels of Education than Majority populations Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 20109

10. But, employment returns to education appear to be lower for the Roma Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201010

11. And wage returns to education (apart from at tertiary level) are much lower for Roma Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201011

12. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201012Analysis LIML applied to a Two equation model (for employment) and a Four Equation model (for wages) LIML applied to a Two equation model (for employment) and a Four Equation model (for wages) 1) Linear equation for years of schooling 2) Probit model of employment determination 3) (Probit of Employee status) 4) (Log-)Linear wage equation (returns to education) For employment, 1) & 2) used For employment, 1) & 2) used For wages, 1) – 4) used For wages, 1) – 4) used Endogeneity and sample selection controlled for. Endogeneity and sample selection controlled for. Estimates undertaken separately for Roma/Majority and males/females Age-group = 25-64 Estimates include also some personal characteristics & country fixed effects

13. Also in this context the employment returns to education are much lower for Roma Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201013

14. Decomposition of employment probability difference between Roma and majority Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201014

15. But wage returns appear to be similar for Roma and majority (n.b. in % terms) Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201015

16. But there is still some room for discrimination based explanations of wage differences Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201016 MalesFemales Mean Roma Wage (€/month) 95.2569.93 Mean Majority Wage (€/month) 203.88166.10 Estimated difference109.0796.17 % of difference due to: Endowments60.6%86.7% Coefficients25.9%19.2% Interaction13.6%-5.8%

17. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201017 simulation

18. Simulated effects on male expected wages of increasing education and removing discrimination Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201018 Majority MalesRoma Males Median Monthly Wage (A)€200€97 Mean Employment Probability (B).740.597 E(Wage): (A) * (B)€148€58 Change in E(Wage) from one extra year of education+€19+€7 Change in E(Wage) from raising Roma education to 12 years -+€49 Change in E(Wage) from removing discrimination-+€27

19. Poverty & Social Inclusion in the Western Balkans, Brussels, Dec 14-15, 201019 Concluding Remarks Evidence in favour of both low education and discrimination based explanations of poor Labour market outcomes of Roma Evidence in favour of both low education and discrimination based explanations of poor Labour market outcomes of Roma In particular, Roma have much lower employment returns to education – also consistent with discrimination as a major factor – wage returns (once endogeneity/selection is controlled for) are relatively similar In particular, Roma have much lower employment returns to education – also consistent with discrimination as a major factor – wage returns (once endogeneity/selection is controlled for) are relatively similar Perhaps more interesting is the connection between these explanations – if returns to education are lower for Roma then it is rational for them to acquire less education Perhaps more interesting is the connection between these explanations – if returns to education are lower for Roma then it is rational for them to acquire less education Major Policy implication – Cannot tackle education deficit without dealing with discrimination issues Major Policy implication – Cannot tackle education deficit without dealing with discrimination issues