More pressure on pay

More people were working in February, but more pressure on their salaries is coming with the war in Ukraine impacting on major commodity prices, which will lead to higher prices and higher inflation.

The monthly BankservAfrica Takehome Pay Index (BTPI) indicated that recovery from the massive Covid pandemic shock continues as the share of payments to casual and weekly workers continued to climb in February 2022.

The BTPI measures the average South African salary and revealed double-digit growth year-on-year for the number of salaries paid to casual and weekly workers, but this also contributed to a decrease in the average salary.

Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said the average real take-home salary for February 2022 decreased by 4.1% to R15 517 on a seasonally adjusted basis and on a nominal basis, the average takehome pay was 1.3% more at R16 022.

While the BTPI focuses more on the average salary, Naidoo pointed out that after the double-digit declines in the casual and weekly wage data estimates for a long period, both these salary bands have now had double-digit growth on a year-on-year basis.

What does this mean? Naidoo said the actual decline in the average real takehome pay signalled a return to work for the more vulnerable groups of lower-paid employees.

Mike Schussler, chief economist at Economists dot coza, who worked on the BTPI, said the February inflation rate of 5.7%, would further decrease the real take-home pay of formal sector employees paid via the BankservAfrica system.

“With inflation likely to stay at over 5% and even 6% for several months, takehome salaries will face declines for a lengthy period that could be closer to a year.”

The war in Ukraine affects major commodity prices from oil to wheat prices which will impact inflation not only in SA, but globally.

Considering that most salary agreements conclude retrospectively, it will take take-home pay a while to catch up to the adverse developments.

Due to the higher inflation rate and the crisis in Ukraine, which have led to soaring oil prices, the SA Reserve Bank had to increase the repo rate and although household borrowing has eased to below the inflation rate, this could result in higher costs of goods and services.

“Add to this the escalating food prices and rising fuel costs, and South African salaries could be under even more pressure. We expect consumer expenditure, such as retail sales, to continue growing moderately for the time being and as the economy drives employment again,” said Schussler.

The overall take-home totals paid into all the bank accounts of employees increased by 0.6%, the first time since September 2019 that total monthly equivalent payments increased to over four million again. Although this data is very volatile, it suggests most employers have recovered from the Covid shock.

Most places of employment have recovered from the Covid shock