Formal salary levels have recovered to close to where they were before the Covid-19 crisis says payment facilitator, BankservAfrica.
According to the BankservAfrica Take-Home Pay Index (BTPI), which tracks salaries going through the banking system on a monthly basis, there was a 3.1% increase in April 2021 on a year-on-year basis.
This rise is a notable turn for the better as it follows many South African households taking a knock a year ago, as multiple pandemic-induced lockdown measures resulted in salary cuts and retrenchments.
“The majority of businesses had to adjust their operations, or shut down, leading to big payment losses for overtime workers,” notes BankservAfrica.
Though the latest rise in salaries seems impressive, it does not tell the whole story. This upturn comes off of a low base, as there was a decline in average salaries in April 2020 when compared to April 2019.
Back in early 2020, South Africa’s economy was already in a poor state as it had entered recession.
It should also be noted that the full impact of the lockdown still had to be felt as the real pain was only experienced months after its start in late March 2020.
BankservAfrica also points out that a reduction in non-full-time workers last year might have skewed the index.
“The likely decline in temporary workers contracted on an ‘as-and-when basis’ by larger firms in 2020 may have contributed to this improvement. It is also possible hourly and part-time workers were paid less, which increased the average and even the median take home pay tracked in the BTPI for April 2021.”
After inflation, the average take-home pay was R12 958 in real terms in April 2021, which compares to R12 567 for the corresponding period a year earlier. BankservAfrica says the typical take-home pay increased 2.2% after inflation.
BankservAfrica makes the point that it was using the ‘typical’ measure, also known as ‘median’, which is the middle of the overall take-home pay (or the 50th person out of 100) and not the ‘average’.
The average, in contrast, is the total sum of the participants’ earnings divided by the number of participants.
Unlike the average, the typical figure is not influenced by the number of “few well-paid people or decline in the number of temporary workers paid”. This is why the typical figure better represents a reflection of actual salary trends at present.
Though the total value of all salaries paid rose 4% in real terms in April 2021, it’s not a true indication of current economic trends because it does not take into account that “conditions hit some harder than others”.
BankservAfrica also points out that its own data under-represents small firms and does not measure the informal sector.
Despite its data not giving the whole picture when it comes to the state of household pay and employment, it says the SA economy has seen a marked turnaround.
“Although our data cannot project the unemployment rates, we are convinced that large private sector employment is close to recovery at 95%. We believe large private sector employment is returning to levels seen before the pandemic.”