BankservAfrica’s BDSI shows real-take home salaries improve in June

Improvements in the last four months suggest turnaround for shrinking wage trend.

South Africans are taking home higher salaries for the fourth month in a row. This is according to the BankservAfrica Disposable Salary Index (BDSI) which showed a 1.3% month-on-month improvement.

The BDSI is a unique time series which tracks and measures salary growth in South Africa according to monthly salaries processed by the BankservAfrica payments system. In June 2017, the BDSI showed seasonally adjusted real take-home pay averaged R13 894 in June. This compares to the R13 802 in May and is due to a combination of slower inflation increase and faster nominal wage growth. As such, South African formal sector workers are better off than a year ago.

“Since 2015, real take home pay has declined. However, the figures since March 2017 suggest this trend may change as inflation falls and salaries are adjusted,” says Mike Schüssler, Chief Economist at Economists dotcoza. Formal sector real salary increases, which are based on past inflation rates, recorded an improvement.

In nominal price terms, the average disposable salary increased by 6.7%. This was slightly higher than the 6.6% increase recorded in May 2017 over May 2016. “With the reduced repo rate, debt repayments are likely to decline. As a result, employees should have extra cash in their pockets to spend. Furthermore, we can expect a slight decline CPI which will make real increases in disposable salaries more likely”, says Schüssler.

Interestingly, the median or typical disposable salary increased in real terms by 3.4% in June – the highest for median salaries in 30 months. Despite personal income tax brackets not being fully adjusted for inflation for the last decade and medical insurance payment increases of 3% above inflation, the number of employees taking home over R10 000 per month in nominal terms has increased from 33.8% in January 2012 to 52.6%. This could be attributed to take-home pay increasing faster at the lower salary levels.

“While consumer confidence is at very low levels in the economy, real salaries for the majority of the formal sector employees have increased, even after inflation. This should improve consumer confidence indicators and see a rise in real retail sales again,” says Schüssler.

BankservAfrica’s Private Pension Index (BPPI), the only monthly time series of private pension income payments of its kind, shows that June’s private pension payments continue to increase above the rate of inflation. The average banked private pension grew by 1.9% in real terms in June 2017. The average pension paid in real terms was R6 567 in June 2017. This is higher that the June 2016 figure of R6 443.

The real typical pension increased by 0.2% on a year-on-year basis.

“Despite four years of relatively underperforming inflation on the South African equity market, private pension payments continue to grow above the rate of inflation,” ends Schüssler.