Average salaries outpace inflation, total payouts down as strikes bite

The full implications of the current spate of wildcat strikes are slowly being revealed, as the latest BankservAfrica Disposable Salary Index (BDSI) shows that both the number of salary payments, as well as the amounts paid, have decreased significantly o

This reveals the downstream effects of the strike in the retail sector, as employees’ spending power is affected by salaries not being paid to workers on illegal strikes.

Recently, the BankservAfrica Economic Transaction Index (BETI), an index reflecting electronic transactions facilitated by BankservAfrica, showed how the September strikes were pushing a stagnating economy ever closer to the edge of a recession.

Fewer payments, less money

The number of salary payments declined from 4924000 in September 2011 to 4703000. This represents a decline of 4.5%, which may be accounted for by the fact that the month of September had one less Friday, according to Brad Gillis, BankservAfrica’s CEO for PSO (payment clearing house system operator).

“But even accounting for this, the worrying factor is that there seems to be about 47000 fewer payments than expected. The total amount of money paid out declined for the first time since the state strike in 2010,” says Gillis.

This represents about 1,5% of the workforce who did not get salary cheques in the last month as a result of the strikes, explains chief economist at economists.co.za Mike Schüssler.

“Even more worrisome is the fact that the total amount of money paid out seems to have declined with nearly 3% despite average disposable salary increases of 8.1%,” Schüssler says.

The total payment should have increased with at least 10%, assuming no extra employees, either employed or reflected in the BankservAfrica transactions system.

The effect of the strike

According to Schüssler, August 2012 had a much higher payout as a result of government salary back pays, and this “bonus” may still linger in September’s economic data. The actual non-payment is difficult to estimate for August 2012, since government back payment of increases to nearly 1.8 million employees increased total payouts to nearly 20% higher than August 2011.

This may have been higher due to the effect of the wildcat strikes, which seems to be in the region of about R700 million from the non-payment of salaries in August 2012.

“With the wildcat strike action now 10 weeks old, it is very likely that disposable salary losses will continue in October. The second round of effects is, therefore, not yet fully felt in the rest of the economy,” Schüssler explains.

This second round will affect other parts of the economy as repayments of durable goods, such as cars, are likely to not be forthcoming, and pension payments may also suffer. Retail and wholesale sectors are also likely to feel the effect of lower salary payouts.

“Strikes are probably the major reason behind this. It seems that the strike is having a rather large impact on the total disposable salary available and must have an influence on other sectors as well, such as retail. Loans may help striking workers make up the difference in retail purchases, but this has to be repaid.”