BankservAfrica’s latest data reveals South Africa’s total salaries paid declined significantly in May, reflecting the downturn in take-home pay numbers.
Also, as low-income earners remain under pressure from the Covid-19 lockdown, South Africa’s monthly salaried workers are facing the same challenges with at least one in five private sector jobs currently at risk.
“The BankservAfrica Take-home Pay Index for May decreased by 0.2% in real terms despite the lower inflation and decrease in personal income tax,” says Shergeran Naidoo, head of stakeholder engagements at BankservAfrica.
“While take-home pay remains stable, the average hides the big disparities in the employment context. The Covid-19 lockdown has impacted employees taking home less than R6 000 per month far more than those earning more than R40 000 per month,” says Naidoo. “However, BankservAfrica’s overall take-home pay data for May reveals the likely growing rate of unemployment.
“On average, the number of employees taking home more than R40 000 per month over the last three months, increased by 8,1% on last year’s employee numbers,” Naidoo adds.
The number of payments made to employees earning less than R10 000 per month decreased by 13,4% on a three-month moving average basis on a year ago.
On the same basis, the number of take-home payments between R10 000 and R39 9999 per month increased by 1,8%.
“So, while the average take-home pay, as measured by BankservAfrica, decreased by 0,2% after inflation, the typical or median take-home pay increased by 4,2% after inflation,” says Naidoo.
However, the overall amount paid to all employees via the BankservAfrica system declined by -7,2% in real terms, reflecting the overall impact of the Covid-19 crisis – even with the UIF Covid-19 Temporary Employee Relief Scheme (TERS) pay-outs, tax reductions and pension payment holidays.
“The lockdown has hurt people who take home less than R10 000 per month, which includes most casual and many weekly paid employees,” says Mike Schüssler, chief economist at economists.co.za. “These type of employee numbers have declined radically with some working short time.
“We estimate that the number of payments for casual employees has been cut by 26% and weekly payments, by our estimates, have declined by 9% while monthly payments numbers decreased by 2%.”
This is also the reason that the median salary – the salary in the middle of all salaries – rose dramatically. The UIF, lower personal income tax rates, lower interest on company loans and garnishee orders, pension contribution holidays have counteracted impacts such as salary cuts.
“However, with the retrenchment notices being filed, one does suspect that monthly paid employees will also start to feel the impact,” says Schüssler.
BankservAfrica data monitored over 4-million take-home pay transactions in May. This represents about 2,75-million employees in the formal sector in May 2020, down from 3,16-million people in May 2019.
“Counting employee payments made via BankservAfrica’s system, we estimate that about 13% of employee payments have disappeared,” explains Schüssler. “This does not translate into the exact number of additional unemployed individuals in May as some payments have gone from weekly to monthly, as would be the case when a weekly wage earner gets paid UIF.
“Also, payments on the BankservAfrica Take-home Pay Index are far more likely to represent that of bigger enterprises and government.”
He continues: “If government employee numbers remained stable, this would indicate that about 17% of the private sector employee payments have disappeared from the system. This is nearly one in five private sector wage payments that, according to our data, have vanished into thin air.”
This, however, does not mean that these employees are now all unemployed but that they did not get their usual weekly or daily income regularly. Some weekly payments are likely to have changed to monthly if the UIF is paying.
Taking all of this into account, we can presume that around 20% of all private sector salary payments did not take place in the last month, which is concerning as it indicates a massive spike in unemployment.
“Our take-home pay data tell us that at least one in five private sector jobs are currently at risk. South Africa could see between 1-million and 3-million jobs lost with about 1,8-million as the most likely number,” says Schüssler.
“Employment is a lagging indicator and we know, from its economic history, can take over a year to fully reflect the full extent. Many services are still not open and many others are not seeing the same turnover as before. Exports have also dropped. Having said all of this, we also wish to point out that the early signs of ‘normalisation’ are appearing that could turn the tide.”
But for now, the road will be difficult. The BankservAfrica Take-home Pay Index for May showed the total value paid to employees decreased by 3,8% in nominal terms and 7,2% in real terms in May.
“This does not bode well for consumer spending or confidence that will very likely remain low for the coming months as both salaries and jobs are under pressure,” ends Schüssler.