Take-home pay drops dramatically
TAKE-HOME pay in South Africa declined dramatically last month and is expected to remain under pressure until next month, according to the latest BankservAfrica Take-home Pay Index (BTPI).
The index points to employees having to carry the burden of the shrinking economy, while private pensions bolster consumer spending.
The BTPI found that the delay in government wage settlements in May dragged down average real (after-inflation) take-home pay, and this was likely to continue until July.
Mike Schüssler, the chief economist at Economists.co.za, said although the delay in public service wage increases resulted in a decline in the BTPI, salaries in other sectors increased, and, together with small amounts of tax relief, the nominal value increased by 2.9 percent.
However, for other large employers, the shrinking economy and low profit margins made large salary increases unlikely, with employees bearing the burden of the difficult economic environment.
The public service is the largest employer and the largest single wage bill in South Africa, accounting for a total wage bill of just over 25 percent of the total non-farm formal sector wage bill, and between 33 percent and 35 percent of the total take-home salaries paid by BankservAfrica.
Schüssler said the decline in take-home pay put the BTPI at the same level as in December 2013, with the small gains the index had made being lost because of the delayed public service wage settlement. As such, May is likely to reflect badly not only for retailers, but also for other sectors that rely on consumer spending.
He cautions that take-home pay levels are likely to remain under pressure until July, when the public service wage increases, as well as back-pay, come into effect.
Privately banked pensions in May continued their growth path for the 15th consecutive month, increasing by 4.5 percent in real terms, according to the BankservAfrica Private Pensions Index (BPPI).
The BPPI is the only monthly pension measurement in the world and records more than 670 000 pension payments every month.
“The average take-home salary was R14 290 in current terms for May 2018, showing a decline of 1.3 percent in May 2017,” said Shergeran Naidoo, the head of stakeholder engagements at BankservAfrica.
“In real terms, the average salary was R13 621, R290 less than for April 2018. Salary payments through our system indicate that the typical takehome pay was actually closer to R10 730 in May, which showed an increase of 2.8 percent before inflation from the typical take-home salary of R10 010 in constant 2016 terms. However, with inflation, typical salaries declined by 1.5 percent,” he said.
“In current prices, private pensions increased by 9.2 percent on a year-on-year basis,” Naidoo said.
He said that, in nominal terms, the average pension increased to R7 430 in May. In real terms, May’s BPPI was R6 976. Average private pensions payments now represent 52 percent of average take-home pay, the highest recorded and the second month in a row.
“This strong performance, however, is unlikely to be maintained once civil servant salaries are realised, and should return to the 49 percent average level of take-home pay,” said Schüssler.