31 July 2018

 

Real-take home takes a fall in June

Delayed public sector salary adjustments takes a toll on June’s real-take home paying


 

Real-take home pay for June experienced its largest decline since early 2017 owing to rising inflation and the delay of annual salary adjustments and back-pay in the public sector, the leading employer in South Africa. This is likely to have an impact on the economy with consumer spending expected to take a knock.

 

“In current terms, salaries increased by 2% on a year-on-year basis but the inflationary increase of 4.6% over the same period saw real take-home pay actually decrease by 2.4%. This is the largest since January 2017,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.  “This means that consumers will not have as much money to spend as they had in the year prior. And this will have a knock-on effect as the costs of the VAT increase and rising fuel prices bite into their budgets.

Naidoo adds that the average take-home pay for the formal South African employed adult paid via the national payment system of South Africa was R14 302 in June in real terms and R13 593 in nominal terms.

“The real-take home pay collapse in June is due to the three month delay in annual salary adjustments of the public sector,” says Mike Schüssler, Chief Economist at Economistscoza. He further explains that the public sector wage increases backdated to April were only paid in July, impacting the level of real take-home pay.  The public sector makes up about 30% of the BankservAfrica Take-home Pay Index.

 

“Therefore, it is likely that consumer spending will fare better in July when government, being the largest employer in South Africa, makes these back payments,” says Schüssler.

 

The BankservAfrica Private Pension Index for June showed the real average pension paid into bank accounts increased to R7 008.  “This is the first time that real private pensions increased above R7 000 per month. The increase of real pensions currently stands at 5.5%,” says Naidoo.

In real terms, the average pension increased to R7 668 for the month of June. The boost in nominal terms was 10.2% or more than twice the inflation rate.

According to Schüssler, one of the most interesting trends in the last five years has been private pension increases, which rose above the rate of inflation. While pensioners are certainly not as well off as those earning a salary, they have seen their pensions increase above the rate of inflation on a constant basis.

“This is at a time where equity prices have not increased after taking inflation into account, indicating pension assets have been invested more in yield producing investments or that pension drawdowns are increasing,” says Schüssler.

Nonetheless, total banked private pensions in the BankservAfrica data increased from 9.6% of total take-home pay banked to 11.4%, says Naidoo.  This as pensioners are fewer in numbers than those in the workforce and receive only about half of the income of employed people.

“Pension data is positive on every measurable way and indicates pensioners are able to play a more important role in the economy. This is evident in the continuing rise in consumer spending such as retail,” ends Schüssler.

                                                                                                                                                                                                           

For an expanded explanation please see the full report.

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“In current terms, salaries increased by 2% on a year-on-year basis but the inflationary increase of 4.6% over the same period saw real take-home pay actually decrease by 2.4%. This is the largest since January 2017,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.”

Graph 2:  Real change in Take-home pay and Private Pensions

Source: BankservAfrica and Economists dotcoza

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Mike Schüssler has his sayMarket insights from
Mike Schüssler
Well-known economist Mike Schüssler has partnered with BankservAfrica and analyses our payment information.  Read his report for further commentary:
 

Every day large companies, salary bureaus, remuneration companies, government and data centers send salary data for processing to BankservAfrica. This happens when the transaction occurs between different banks and not within the same bank.

This results in between 4 million and 5.5 million transactions per month, with an average of more than 4.7 million per month over the last year.  Note this number does not reflect the full picture, as some salaries are paid weekly whilst others may be bonus payments. 

The weekly data is adjusted to come up with one figure of what an individual would earn, had they been paid on a monthly basis.  Once this figure was added to those who were paid monthly, it was clear that the BankservAfrica data represented about 3 million people out of a formal work force of about 8.3 million, excluding agriculture, using the Quarterly Employment Survey (QES) from Statistics South Africa as guide.

All social security payments, representing around 3.8 million payments at about R1 000 per month, have been removed from the data set. 

The BDSI is published every second month.