Inflation eating into SA's disposable salaries

Cape Town - Real disposable salaries have declined for the fifth month in a row and by 2.6% on a year-on-year basis, according to the BankservAfrica Disposable Salary Index (BDSI) for October.

Real salaries are at levels similar to October 2013, indicating that the average salary has not been able to beat inflation in the last three years.

The nominal year-on-year difference for average South African take-home salaries increased by 3.5%.
“This is the longest period of decline on BankservAfrica’s records for real disposable salaries data,” said Dr Caroline Belrose, head of knowledge and risk services at BankservAfrica.

"I don't think we had a time in the recent past where we had five months in a row of declines in salaries after inflation. Real salaries are falling and it will not be good for retail sales in the broader picture. Consumer spending will remain under pressure," Schüssler told Fin24 on Thursday.

"People are under severe pressure and cannot afford what they could last year. Retailers will have to get better at offering bargains to people who are getting poorer. It is in part because salaries did not rise and partly because tax brackets were not adjusted enough for inflation."
The average disposable salary was R13 413 in October, while the typical disposable salary was R10 061. Both of these nominal salary levels are lower than four months ago. The decline suggests consumers will remain under pressure in the coming months.

In January 2013, the largest percentage of employees were in the R4 000 to R10 000 per month take-home salary category. By October 2016, this changed to the R10 000 to R25 000 per month salary category. This shift is in nominal terms and shows the impact of inflation on earnings, said Schüssler.

“At present consumer expenditure in the domestic economy is bleak. Higher consumer inflation is likely to compound the weak domestic economy with real retail sales declining, along with home and car sales,” he added.
Private pensions continue performance

Meanwhile, private pensions are outpacing inflation. 

The average take-home private pension increased by 8.4% year-on-year in real terms, according to the October BankservAfrica Private Pension Index data (BPPI).
Both the median and average pension, which private pensioners receive, beat inflation for 27 consecutive months, according to Belrose.
This means that for the first time on record, average pensions have reached a level of 48% compared to average salaries.
Over the last four years private pension payments have exceeded salary increases and are reaching higher levels.

The lowest income category of both employees and pensioners for the percentage of employees with an income of less than R4 000 per month declined. The number of pensioners receiving less than R10 000 per month decreased by 8%. Those receiving more than R10 000 per month increased by 86%.
“Clearly the growth in pension payments is far higher than inflation and the growth in numbers of higher salary earners,” explained Schüssler.

However, the largest percentage of pensioners still remains below the R4 000 per month category.
“Compared to the percentage share of employees who receive more than R10 000 per month, the 37% share of pensioners getting more than R10 000 per month is extremely low,” said Schüssler.

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