According to the latest BankservAfrica Disposable Salary Index (BDSI), when taking inflation into account, actual real disposable salaries declined for the fifth month in a row. This is the longest period of decline on BankservAfrica’s records for real disposable salaries data and a 2.6% year-on-year decline.
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.
Currently the BDSI trend is lower even in nominal terms and in the short term. Due to this – and even without the possibility of further job losses – this data suggests that consumers will remain under pressure in the next few months.
At present, consumer expenditure in the domestic economy is bleak. Higher consumer inflation is likely to compound the weak domestic economy as real retail sales, along with home and car sales, are set to continue declining.
Real salaries – after taking inflation into account – are at similar levels to October 2013, indicating that the average salary has not been able to beat inflation in the last three years.
Although salaries are higher than last October, these have been declining for most of the period since then – and now stand at levels of around three years ago.
The weak retail sales along with declining car sales confirm that the low salary increases are translating into lower domestic economic growth. An adjustment on economic growth figures may, however, be necessary as South Africa’s lower current account balance is also the result of lower real salary levels.
The continued advancement of private pensions
Take-home private pensions are still roaring ahead as the average 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.
This means that for the first time on record, average pensions have reached a level of 48% compared to average salaries. The typical take-home pension is 44.4% to median take-home pay. When BankservAfrica’s BPPI data began in June 2012, the average pension was at a level of 44% to average pay while the median pension was at 38%.
Over the last four years private pension payments have exceeded salary increases and are reaching higher levels. The trend in real salary and pensions paid into bank accounts can be seen in the graph below:
In January 2013, the largest percentage of employees were in the R4 000 – R10 000 per month take-home salary category. By October 2016, this changed to the R10 000 – R25 000 per month salary category. This shift is in nominal terms and shows the impact of inflation on earnings.
It is interesting to note that growth in the top two categories made up 7.4% in January 2013 and now make up nearly 11%. The percentage of employees in the top two categories increased by 45%.The largest category of those receiving between R10 000 and R25 000 in their bank account increased by 32% since January 2013.
The bottom two categories saw actual declines in the number of people receiving under R10 000 per month in their bank account. The number of employees receiving less than R10 000 declined by 22%. Again, most of this was driven by inflation adjustments rather than real salary increases.
As can be seen in the tables above, 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.
However, the largest percentage of pensioners still remains below the R4 000 per month category. Growth in the top three pension categories is from a very low base as less than 11% of pensioners receive more than R10 000 monthly in their bank accounts. Compared to the percentage share of employees who receive more than R10 000 per month, the 37%.