Workers hit in pocket
Although South Africans saw their wages climb over the past few years, they do no t necessarily have more to spend.
In a week filled with data releases that will shed light on the state of the economy, it now also seems that the disposable part of salaries has shrunk considerably since 2006.
Mike Schussler, chief economist at Economists.co.za, said the ability of South Africans to spend their earnings is being compromised because certain administered costs have risen much faster in the past six years than their salaries.
Referring to BankservAfrica's disposable salary income index for the third quarter, he said this is due to international economic conditions, but also because of more efficient tax collection in the country.
"People often feel that their rands are shrinking. The latest index shows why by highlighting how the proportion of disposable income has shrunk when compared to factors like tax and the inflation rate."
Schussler pointed at StatsSA data in the quarterly employment survey that show total salaries for individuals have increased by 77% since the second quarter of 2006.
But BankservAfrica's data show that the increase in disposable salaries was less, at only 68% over the same period.
"It is true that personal income taxes were reduced, but definitely not in line with inflation, and certainly not in line with salary increases," said Schussler.
Eskom announced earlier this week that it applied for tariff increases that could see the price of electricity double over the next five years.
This comes on top of a hike of 142% since 2006, more than twice the rate at which disposable salaries have increased over the same period.
Non-tax deductions like pension, medical aid and microloan union fees seem to have increased by as much as 101% over the same period, according to Schussler.
Disposable income is likely to be squeezed further if economic growth slows down to the extend that most economists expect.
Although Reserve Bank data yesterday showed a slight uptick in the composite leading business cycle indicator, it is hardly a turning point.
The leading indicator went up marginally in August. A sharp movement upward can be a foreshadow of a better economic growth.
This was the first time in eight months that the indicator showed improvement. But the paralysis in the mining sector started in August and only picked up speed in the month that followed.
Finance Minister Pravin Gordhan will deliver his medium-term budget policy statement tomorrow and many expect he will officially downgrade the government's economic growth expectations for the year from 2.6% earlier.