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Inflation shrinks real disposable take home pay - index

Oct 30 2017 06:44

Cape Town - Real disposable take-home pay shrank for the first time in seven months on a year-on-year (y/y) basis due to higher inflation in September 2017.

This is according to the latest BankservAfrica Disposable Index (BDSI) data, which showed disposable salaries declined by 1.3%.

The average real seasonally adjusted banked salary was R13 964 in September 2017. In nominal terms, the take-home salary averaged at R14 255.

While these changes do not represent a complete reverse in the trend towards declining take-home pay levels, it has become evident that the lower growth rate in nominal and real terms is becoming the norm, according to the BDSI report.
 
The current difficult economic conditions in SA impact firms and their ability to pay higher salaries. The effective tax rate on gross salaries is also taking a toll.

"Wage earners are under severe pressure and have not had effective salary increases over the last four years," states the report.  

The report explains that sluggish economic growth in South Africa is impacting wages in two ways. Firstly, slower government revenue has affected government’s ability to fully compensate wage earners in line with inflation. This has resulted in higher income taxes for most employed individuals. Secondly, the private sector is unable to increase salaries faster than the rate of inflation.

"The net effect of these is less consumer spending in the next few months on retail sales, vehicle sales, tourism and dining out. While retail sales grew significantly in real-terms in August, the slowdown for real salary growth is already apparent," the report states.

Banked pension reaches a new high
 
Real average private pension paid into bank accounts reached R6 701 - the highest level that real average pensions have ever reached, according to the report. The average constant private pension grew by 2.2% in September, which is the strongest percentage change in four months.

"While the level of private pension paid will remain far below salaries, their impact on the economy is growing not only because they are increasing, but because population and other pension statistics indicate that the fastest growing part of the SA population are those over the age of 65," according to the report.

The real increase in pension payments into bank accounts in total was 14.4% since September 2013. Total take-home salaries had declined by 2.2% leaving total real take-home income down at 0.9%. Pensions are therefore becoming a more important source of consumer spending.

It is important to note that there is far less growth in the wage employment numbers of big employers in SA than people with pensions, according to the report. StatsSA data also points out that employers and self-employed individuals are growing faster than wage earners.

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bankserv­africa  |  salaries  |  inflation  |  sa economy
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