Waiting for that big salary hike? Don't hold your breath, says economist

The slow pace of salary increases in South Africa looks set to continue, economist Mike Schüssler told Fin24 on Wednesday.

He was commenting on BankservAfrica's Take-home Pay Index for July.

The index measures SA's take-home pay via the South African National Payments System in which salary "batches" or pay runs are recorded for transactions between South African banks. Using these, the index then calculates the average salary and adjusts it for inflation and seasonal differences.

"The first quarter of the year was a disaster for the SA economy. After that it started looking better, but that does not mean things are racing ahead," Schüssler said regarding the index data.

Increases mostly in public sector

The index shows that take-home pay in SA increased by 0.9% in July 2019 in real terms year-on-year. Increases were mostly in the public sector.

Although salary increases were low, household expenditure has been given a boost by enabling the ability to spend in a lower inflation environment, according to the index report.

"Overall, it seems the total amount paid just shows me consumer spending will remain a positive contributor to SA's gross domestic product (GDP)," said Schüssler.

"Take-home pay increases above inflation is benefiting employed South Africans and in turn giving a boost to household expenditure. The above inflation increases are certainly helping demand in the domestic economy."

'No fireworks for a while'

He expects that, while GDP might grow about 0.5% this year, consumer spending will show closer to 1% growth. He foresees that SA might be set for a longer period of lower salary increases.

"I don't think there will be any fireworks for the next while, though, and I am a bit scared of job losses in the formal sector," cautioned Schüssler.

"I think you can probably say the private sector is closer to the zero line of salary increases and government closer to 1.5%," he added.

The average real take-home pay was R14 177 compared to R14 049 in July 2018. The index report also points out that, in July 2018 some increases for government employees were still being paid back.

Nominal take-home pay improved by 5.3% year-on-year to reach R15 584. Overall, total payments in nominal terms increased by 6.5% in July, indicating overall salary payments were still in a recovery phase, according to the index report.

However, growth has been off a low base from July 2018 when government salary increases were a little delayed in some cases.

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