SA’s take-home salaries taking strain
Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.
Growth slowing, although still above inflation rate.
Growth in disposable salaries continues to slow, the nominal trend indicates that further increases could be even smaller than currently seen. But it is still above the rate of inflation, according to the BankservAfrica Disposable Salaries Index (BDSI).
“Last month the increase in disposable salaries of 6.5% on a year ago barely beat inflation, which sits at 6.3%,” says Dr Caroline Belrose, Head of Knowledge and Risk Services at BankservAfrica. “However, the R12 501 BDSI average monthly take-home pay for March 2016 still outpaced banked pensions, even though the BankservAfrica Private Pensions Index increased at a faster rate than salaries and was up by 7.4% for the year. The average pension as paid via the payments system of BankservAfrica for March 2016 came in at R6 075.”
Interestingly the total combined payments of salaries and pensions grew by a total of 7.2% over the year to March 2016. It is the seventh month that the total payments have been within 50 basis points of 7%. This is slower than the period of July 2014 to March 2015 where only one month had a growth rate in single digits. While BankservAfrica still exclude payments to bank accounts that are over R100 000, the total averaged over R47.8 billion.
“The slowing trend in the total payments for salaries and pensions is probably the best indicator that the current growth in retail sales is coming from the falling sales of big ticket items such as cars. There is likely to be a bit of extra consumer credit growth driving retail sales too,” says Mike Schüssler, Chief Economist at Economists dotcoza. “The faster increase of median and average pensions was unexpected. But as we do not have a long history of data, it is difficult to have foreseen this. However one must always remember that it is easier to grow from a low base number than a higher one and that pensioners are still not well off by any sense of the imagination.”
The trend in total payments of disposable salaries and pensions shows that the consumer will not be in a very strong position this year.
The slowdown in disposable salary growth is also impacted by personal income taxes that were effectively raised again by not compensating for inflation. This is called bracket creep and means that as people’s salaries or pensions go up to compensate for inflation, they enter a higher tax bracket, therefore in real terms they are taking home the same amount.
The salary of those in the middle of the salary spectrum outpaced those at the higher end due to more people slowly moving up the employment ladder. The median salary shows a growth of 7.2%, which is again better than the average salary.
The typical pension increased by 13.4% on a year ago, and shows that many pensioners have kept up well with inflation. But pension payments are still less than half of salaries.
The typical salary came in at R9 282 for the month of March while the typical pension came in at R4 259. The increases for both medians outpaced inflation in March 2016.
“Within the next few months we believe that retail sales will no longer be growing at a real rate of 4% or even 3%. Interest rate hikes and slower salary increases based on last year’s low inflation numbers will limit the employee’s ability to spend. This is bad news for large item sales like cars and furniture. It is likely that retailers will struggle for real growth in the next few months,” concludes Schüssler.
