Take-home salaries increasing at a slower rate

Cape Town - Only about 1 in 5 South Africans working in the formal sector take home a monthly income of less than R4 000, Mike Schüssler, chief economist at Economists dotcoza, told Fin24 on Wednesday.

At the same time, 52% of pensioners take home less than R4 000 per month.

He commented on the findings of the latest BankservAfrica Disposable Salary Index (BDSI).

While take-home pay is still increasing, it is at a lower rate than a year ago, and therefore the trend overall is slowing, the index shows.

The quickest growth in disposable income seems to be among those taking home about R25 000 to R100 000 per month, according to Schüssler.

This category of earners form overall just over 9% of salaries paid in SA and under 2% of pensioners' earnings.

In interpreting the data, Schüssler said it seems that a large number of people earning salaries are climbing the ranks. The increase in their salaries are, therefore, also due to what he calls "title inflation" - in other words people being promoted or moving on to more senior jobs.

Increase in real terms

Overall the BDSI shows that both salaries and pensions increased in real terms in June with slower real increases than the average over the last six months. The latest index shows an average of R12 849 for June. This is 5.8% higher than a year ago.

Civil servants' gross salary increases were 6.4%, while private sector increases averaged about 7% over the last year.

READ: Public sector delays impact salary growth

The real growth of the average disposable salary in SA is, however, 1% after inflation – "which is positive real growth thanks to civil servant salary increases and backdated payments in June," according to Schüssler.

“The average BankservAfrica disposable salary increase in the first six months of 2015 was 6.3% compared to 8.3% for the first six months of 2014 in nominal terms.

"Salary earners did not do as well as pensioners, but pensioners are coming from a far lower base," explained Schüssler.

"So we are complaining while we have no real reason to complain. Yes, we want to buy more things, but ultimately those of us in jobs typically are still doing OK."

The slowdown is partly because of a lower inflation rate, as most salary adjustments are linked to the consumer price index, according to Dr Caroline Belrose, head of fraud and data analytics at BankservAfrica.

She expects these slower nominal increases to continue as lower inflation impacts on wage increases which will lead to low real wage increases as inflation picks up again.

Wage increases are also low as they factor in the lower inflation rate. The BDSI trend is expected to continue with low to negative real increases for the next few months.

Gross salary increases

The BDSI is also showing slightly lower increases than gross salary increases due to a number of factors like lower salary increases, higher deductions from personal tax as well as higher medical insurance payments.

Garnishee trend

Other statistical data shows fewer cases of civil debt judgements meaning there should be fewer garnishee orders deducted from formal sector salaries, said Schüssler.

READ: Pensions beat take-home salaries in inflation stakes

Private pensions

In contrast to salaries, the average take-home private pension has been increasing at a much faster rate, the BDSI shows. The South African take-home pension averaged out at R5 766 per month - an increase of 3.9% in real terms.

Pension payments are believed to be benefitting from higher equity markets and the weaker rand, as many pension funds have foreign exposure.

This could also indicate that, while pensions are still under 45% of the disposable salary level, the growth in pensions could become more important to retailers and others if salary growth or employment levels come under pressure.

ALSO READ: SA economy not really going anywhere - economist

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