29 November 2017

 

Take-home pay bounces back in October while pensions reach new levels

BankservAfrica’s latest data shows salaried workers feel slight pressure alleviation but potential inflation increases loom

 

Average take-home pay bounced back in October after a decline in September while pensions reached a new high in October.

The BankservAfrica Disposable Salary Index (BDSI) - a measure of real take-home pay – indicates pay cheques to the formal sector employees in South Africa increased by 0.5% after inflation in October. This follows from the 1.3% decline in September on a year-on-year basis. These indicate the September slump was likely just a deviation from the increasing salary trend.

“With the South African household debt to income ratio declining, along with slightly lower interest rates since July, the South African consumer is recovering slowly as disposable salaries have beat inflation since March this year. September’s decline was probably an anomaly, and the trend of a small increasing real wage should continue, as long as inflation remains around current levels,” says Mike Schüssler, Chief Economist at Economists dotcoza.

The BDSI real salary was R13 990 for October this year, R16 less than September but R62 more than October. In nominal terms, the BDSI recorded an average of R14 499.

Schüssler points out that the looming fuel price shock in December could, however, derail the positive real take-home pay trend, which is currently slightly above inflation. Price shocks from electricity could also have an additional impact.

Meanwhile, the BankservAfrica Private Pension Index (BPPI) shows that pensions paid increased by 31.3% in September while the total amount increased by 38.6% before any smoothing and calculations. Schüssler highlights that this significant increase resulted in the total salaries and pension income paid into bank accounts increased by 7.6% instead of the nominal 6.6%.

“The increase is, in part, due to extra payments for Transnet pensioners, which we estimate accounted for about 35-40% of the increase. Some other pensioner ‘bonuses’ were also paid into pensioners’ bank accounts further contributing to the unusual increase.

The size of the extra payments to pensioners in October this year was a nominal R1.6 billion compared to the same time last year. This represents the biggest extra payment amount since April 2015. In real terms, the value of the total pension pay-out was the highest on record and will probably make a substantial difference to retail sales if it has not already,” Schüssler says.

He points out that while the average real pension increased by 1.5% year-on-year it is important to note that the average pension paid is smoothed and there were no allowances for the extra payments to maintain the integrity of the time series. “It does, however, seem that many pensioners had a once-off bonus, meaning that their individual pension doubled for the month,” says Schüssler.

Real pensions averaged R6 457 for the month and R6 859 in nominal terms.

For the first time on record, aggregate pensions were 13.5% of salaries paid, which is unusual as the pensions values paid normally totals about 10.3% of salaries over the last year.

However, the average pension, as well as the median pension, have been performing well over the last few years, having consistently outperformed inflation. This indicates that interest rates play an important role in the performance of pension payments.

 

For an expanded explanation please see the full report.

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"September’s decline was probably an anomaly, and the trend of a small increasing real wage should continue, as long as inflation remains around current levels." according to Mike Schussler

Graph 1: BDSI and BPPI nominal levels

Source: BankservAfrica and Economists dotcoza

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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.