According to BankservAfrica’s data interpreted by the economist Mike Schüssler, more South Africans are getting richer and at the same time many middle class workers’ suburban dreams are being shattered. This is according to the latest BankservAfrica Disposable Salary Index (BDSI).
This news strangely comes at a time when South Africans’ average disposable salaries have increased by more than 5% for two months in a row.
This increase in disposable income coupled with an increase in retail sales, is a major factor in the pick-up that was experienced in the economy in June. It may also be the saving grace that is currently keeping the South African economy from going into a recession.
More people getting more, more people getting less
According to the latest edition of the BDSI, the number of high income earners has seen spectacular growth over the past year.
According to Michael Rubenstein, head of corporate reputation and marketing at BankservAfrica, the number of people earning between R50 000 and R100 000 per month has grown by an astonishing 21.7%. In fact, all segments earning a disposable salary over R10 000 per month grew in number of salary payments – mainly in double digits.
At the same time the number of people earning below R4 000 per month has jumped by 18.1%, year-on-year. The latter could be due to more weekly earners becoming part of the banking system, or garnishee orders on middle and high income earners.
The number of people earning between R4 000 and R10 000 per month (i.e. typically the middle class wage earners) declined by 4.2%.
The median disposable salary, which is the average salary weighted by the numbers of workers in the different income bands, currently sits between R9 000 and R10 000.
The impact on the middle
“The increase in low income earners may be due to more salaries being paid via the BankservAfrica system and this trend has been growing over the last years, especially amongst those who are paid weekly,” Rubenstein explains.
“However, the other scary possibility is that there may be so many middle class earners with garnishee orders against them, that their income is being pushed down to lower income bands.
“It is hard to pinpoint the reason for this phenomenon. At the end of 2011, over 46% of the payments made were in this category, but now the figure is only about 36% of all payments.”
Higher average income during strike season?
According to Mike Schüssler, chief economist at economists.co.za, an interesting feature of the latest BDSI figures is how it relates to the long-running strike in the mining sector.
“Despite the platinum strike website indicating that about R2 billion in salaries were lost every month during the strike, the total salary bill, as reflected by the BDSI, still grew by 9.7% for the month of June!
“The total number of payments also increased by nearly 9% and, as incredible as it may seem, real disposable salaries increased by 5.9% in June 2014.”
Schüssler says adjustment needs to be made for unusual payouts as these could influence the numbers.
In May, over 218 000 extra payments were made due to election officials being paid throughout South Africa, according to the IEC. This added approximately R1 billion to the overall payments. Furthermore, it seems that government pay increases for April were only paid in May for both May and April 2014.
Additionally, many of the extra IEC payments were made to government officials, increasing their average payments even further.
Although some strikes continued in June, there were extra payouts for platinum mineworkers as companies paid outstanding increases when people returned to work.
“Since we use a smoothed series, there are still some of the election payments and back-pay in the overall BDSI, which means that the increase may be at least partly artificial at present,” Schüssler explains.
Above-inflation salary increases despite economic pressure
“The overall message is that despite strikes and layoffs, the BankservAfrica BDSI data indicates that the overall salary bill is still rising and that those in formal employment are still getting increases in their disposable salaries that are above inflation,” says Schüssler.
“Thus, despite at least 125 000 people being directly affected by the platinum strike, retail sales and total salaries paid have continued to increase without increasing credit growth.”