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Uptick in take-home pay thanks to public servant backpay

Aug 29 2018 21:03
Carin Smith

Real take-home pay reached R14 076 in July from R13 611 in June, according to the latest BankservAfrica Take-home Pay Index, released on Wednesday.

In nominal terms, the average take-home pay reach R14 828 in the month of July 2018.

Economist Mike Schüssler told Fin24 that back-pay of civil servants, after wage negotiations were concluded, had a significant impact on the latest index figures.

Take-home pay reflected a 0.3% real increase in July 2018, following the public services’ agreement with government for salary pay increases, as well as back payments from 1 April 2018.
 
According to the index report, this increase comes despite the fact that inflation jumped from 4.6% to 5.1% in July.

'Sustained positive increase'

Schüssler said it indicated a strong likelihood of a sustained positive real increase for the average South African formal sector take-home pay in the next few months.

"We expect the back pay would have a positive impact on retail sales and fast food sales. For a little while, a few more people will smile, but that does not mean the SA economy will boom," said Schüssler.

"It means some of the pressure on some of the people is less. We have to see how it will pan out. There is not a consumer boom yet, but I expect retail sales to recover a little."

His advice for those who have now received an increase in take-home pay is to pay off as much debt as possible.

"We are not in an easy time economically. We are probably looking at the economy only starting to function on more cylinders after the elections next year. This is because the change at state-owned enterprises (SOEs) will take time," he said.

"Ultimately, for now, I think most people can just pay off a little bit of debt and be in a better situation when a boom starts again."

Inflation

At present, it appears that, if inflation stays below the 5.5%-mark, take-home pay will remain above inflation for a while even if other sectors of the economy are not getting more than 5.5%.
 
According to the report, these increases should help retail sales recover a little, but it may also lead to higher imports of consumer goods.

However, the average take-home pay in the formal sector should remain above the inflation level for the next few months.

There does seem to be a declining trend as four out of the last five months have seen decreases in the number of employees.

While the BankservAfrica system is not able to measure employment gains and losses, it does appear that some reduction in employee numbers may be taking place.

While these are not significant, it does appear the trend of increasing employee numbers is falling away, according to the index report.

Private pensions

Private pensions, as paid via the South African payments system, showed a real increase of 5.1% – a slightly slower increase than the 5.5% in June 2018.

This brings the average increase to 5.3% for the first seven months of the year – and the strongest for the first time since BankservAfrica’s private pension income records began in June 2012.

The average real pension was R7 012 in July 2018. This brings the average pension paid to 50.4% of the average take-home salary. This is also the first time that average pensions have averaged over 50% of average take-home salaries since the records began.
 
The index report points out that at times, there is a close relationship between retail sales and take-home pay and private pensions in total.

It points out that this, however, must be deflated with retail inflation rather than the normal inflation. Retail inflation is often very different to overall inflation, as services such as water, electricity and rent are also included in the normal Consumer Price Index (CPI).

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bankservafrica  |  salaries  |  sa economy  |  pensions  |  money
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