BDSI reveals disposable salaries still under pressure

According to the latest BankservAfrica Disposable Salary Index (BDSI), consumers are working hard to earn more, but finding it increasingly difficult to fulfil their obligations. And, unfortunately, credit is an increasingly alluring option to make ends m

According to Brad Gillis, CEO of regulated products at BankservAfrica, disposable income has increased by only 3.8% over the last three months compared to a year ago. “This means the real situation is an actual decline after inflation,” Gillis says. “This is the fifth month in a row whereby actual real disposable salaries declined on a year-ago basis, and the eighth time in the last nine months.”

It appears times are tough for consumers and chief economist at economists.co.za, Mike Schüssler, agrees - as he verifies this is the longest decline since 2005, when the BDSI data series began. “While nominal disposable salaries are still increasing, these increases have averaged less than 5% over the last few months,” Schüssler advises. “This is a clear indication that disposable salaries are once again not increasing as quickly as gross salaries.”

More money, less cash

It is estimated that deductions take a chunk of over 30% from the average gross salary in South Africa. The reason for this is likely to be the increase in the cost of medical insurance (10.2% year-on-year according to Statistics South Africa) and personal income tax, which has also increased by over 10% on the same basis.

Research has shown that taxes, medical insurance, pensions and garnishee orders are the four biggest deductions from disposable salaries. They are followed by UIF and other statutory deductions, as well as loans (deducted at bank level), in some cases.

Schüssler says with the exception of December 2012, the declining trend in real disposable salaries indicates that households will remain under pressure. “The average South African consumer is in all likelihood having to cut back. Unfortunately then, based on the BDSI data, one would expect that the consumption part of the economy will only be maintained if further loans are made to consumers.”

More top-earners

The number of people earning more than R100 000 per month has increased (although this salary bracket is excluded from the BDSI). At the same time, the overall total disposable salary paid has risen substantially by over 14%.

Although this percentage increase in the total amount of salary paid does not reflect the average increase in South Africans’ salaries (for example, the percentage is pushed up by the number of top earners increasing, or when more people enter the BankservAfrica payments system from a paper based system such as cheques), it does indeed indicate that employees have less cash in their pockets in spite of earning more.

“The irony of our situation is that people strike for better wages, but end up earning less after deductions and inflation,” Schüssler says.