Author: Mike Schussler Source: BankServAfrica
Press release: for immediate dissemination
25 April 2013
BDSI shows disposable salaries are not keeping up with inflation
Larger numbers on your pay slip, less money in your bank account and a greater temptation to rely on credit for general expenses – that is what the latest BankservAfrica Disposable Salary Index (BDSI) has revealed.
Brad Gillis, CEO of regulated products at BankservAfrica, says the last three months have shown a year-on-year increase in salaries. This growth, however, has been below inflation in six of the last seven months and is becoming the longest real decline - since 2004 – according to the BDSI data set.
“Unfortunately the average consumer may believe that their take-home pay is more, when in reality they are actually getting less in their bank account after inflation. There is also a clear trend that disposable salary payments going through our payments system are increasing at a slower pace than a year ago,” Gillis explains.
The average monthly disposable salary adjusted for weekly payments was R10 722, while the smoothed disposable salary was R10 338 per month in March. The smoothed salary index was 4.6% higher than in March 2012.
“For seven months now the BDSI has not increased with more than 6% on a year-ago basis. This indicates that employees are not getting the same disposable salary increases as before,” says Gillis.
Chief economist at economist.co.za, Mike Schüssler, concurs and explains this is the longest period of increases below 6% in average disposable salaries since August 2005. And this is despite indications that average employee gross salaries increased by 8.9% in the fourth quarter of 2012. In reality, the average disposable salaries grew far less.
Where does the cash go?
“Major deductions are in all likelihood increasing rapidly and the average employee is seeing bigger deductions before his money goes into his bank account,” says Schüssler.
“The long and short of this is that deductions, which vary from taxes to medical aid payments and sometimes even garnishing orders, are resulting in the average person’s disposable salary growth not keeping up with inflation.”
He says this must be partly due to individual income tax growing by 9.6%, resulting in higher deductions. Medical insurance also increased by close to 10% on a year-on-year basis. UIF deductions grew with over 20%, subtracting ever more from gross salaries, resulting in the declining growth in disposable income.
According to Schüssler, indications are that the biggest consumer grouping in the country is under pressure.
“This is likely to result in less consumer spending in real terms, unless consumers make use of credit. However, the largest consumer boom since the end of the great recession is very likely now near its end,” he says.
The BDSI numbers
According to BankservAfrica salary data, the median disposable salary which goes through the South African payment system is between R6 000 and R7 000 per month for the first quarter of 2013, adjusted to a monthly figure and taking into account weekly payments.
Of all monthly equivalent disposable salary payments, 36.3% were above R10 000 per month, while 32% of them were under R4 000 per month in the first quarter of 2013. The remaining 32% of the monthly disposable salary payments were between R4 000 and R10 000 per month.
Pensions on the increase
While it appears that disposable salaries are not keeping pace with inflation, Schüssler adds the good news is there seems to be a small increasing trend, showing that the assets in the pension system have grown at least enough to pay a little extra into pension accounts.
“South African pensioners take a major dip in their income once they retire, having to live on less than half the income of regular employees, however, the average pension is on the increase,” he says. The average pension payment going through the banking payments system was R4 854 in March and averaged R4 702 for the year to March 2013.
Schüssler notes the pension payments are that of private pension payments and are not those paid by the state to people who have no pension. This data therefore indicates that for many people retirement means a scaling down of lifestyle from their employee days.
Contact Gerian Miller for more information: email@example.com or (011) 497 4067
Note to the editor:
The BDSI data is smoothed on a three month moving average basis and adjusted for both weekly payments and pension payments. The average pension payments are only about 60% of those of people in employ, so the BDSI focuses on the employed and their salary pay outs. We therefore adjusted the monthly numbers to take this into account. The average disposable salary is adjusted on a constant basis for these two factors. December is a very high pay out month and somewhat distorts monthly averages, but we believe that the year-on-year trends remain intact.