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  Paracat, you seem to be implying that South Africa's implementation of giving employment to previously disadvantaged individuals might be hindering the employment of competent staff. I could be wrong...  

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The South African wage myth

Several salary data research studies debunk claim of a R4 800 median formal sector salary.

Ever wondered where all the cars in South Africa come from, if only three out of ten South Africans work in the formal sector and half claim they earn less than R4 800 a month?

Well here is the evidence that this claim is totally removed from reality and is a very common lie. Minimum wages will soon become a reality and the only question is what the amount will be.

Normally one would expect business, especially big business, to parade research that the situation is unaffordable, but this – almost surprisingly – is not the case. Big business is actually not even taking part in this debate, at least not in public. Small business has also not been very vocal, but then again, this sector has been silent for the better part of two decades.

Many academics have done extensive research into the subject and, based on several surveys where workers were asked what their wages were, have found that median wages in the formal sector are about R5 100 per month, adjusting the formal sector median from the Labour Force Survey (LFS) which finds the median for the formal sector at about R4 800 per month.

The actual median salary is a lot more and this is why big business seems unconcerned about the introduction of the minimum wage. The LFS’s formal sector median of R4 800 per month is a myth and has been known to people who do the actual payments on behalf of big companies for some time.

The fact is that the formal sector is already paying well above the minimum wages, although there are a few sectors such as agriculture, retail and security industries that pay less. (These businesses are predominantly small businesses and minimum wages are often under R4 000 a month.)

Domestic workers and the informal sector also receive wages below R3 000 a month, but the big bulk of wages in the formal sector, especially in major towns, are significantly higher than the proposed minimum wage.

Wage surveys lie and the results are misused

Surveys such as LFS claim that the typical wage in South Africa for all workers (formal and informal combined) is under R3 200 a month. It also claims that a typical wage in the formal sector (excluding agriculture) amounts to around R4 800.

While some academics have adjusted the formal sector upwards to about R5 100, other more reliable data and economic indicators show that even this adjustment is a significant underestimate. Unions have often used the LFS wage data to show that workers do not receive inflation-adjusted wage increases and that the typical worker cannot make ends meet. These unions from the formal sector seem to be saying that they have not been successful despite being able to negotiate higher wages in excess of inflation for decades. They claim they were unsuccessful despite regular strikes, several government determinations and the introduction of many bargain council decisions.

There are many real life examples that debunk the low wage myth.

Three data sources that dispel the myth 

There are at least three independent data sources that provide perspective on income and salary data and which show the large holes in salary survey data. 

Firstly, the National Credit Regulator has been capturing data on consumer loans since 2007 and this data shows a median wage that is much higher than the official median. This data also includes claims of income from people who receive social grants and remittances from family members. The sample is also very large. There are approximately 20 million applications every year for loans from a variety of credit providers. This data indicates that the national median personal income is R8 134, which is a lot more than the LFS’s all worker median of R3 120.

This data therefore shows that the typical income is 160% above the typical survey data and it includes people on grants or who get remittances from family members. (See graph)


The story of two medians

Mike image

Source: Economists dotcoza from NCR and StatsSA data.


Secondly, debt councillors who deal with people who cannot pay their debt, also compile useful data. This data shows that in the year ending in March last year, the typical individual with a debt repayment problem earned between R7 500 and R 10 000 per month. The sample is also significant as about 90 000 individuals were placed into debt counselling in the year to March 2015.

But perhaps the most damming administrative data that shows that income questions in surveys are not answered honestly, is from the taxman.

In the tax year to end March 2013, just less than 80% of completed income tax returns processed showed the number of taxpayers earning more than R400 000 was over 750 000!

Compare this with the Labour Dynamics report compiled from the LFS that shows only 487 000 individuals earned more than R360 000 per annum in the whole of 2013.

This suggests that the taxman has at least 85% more people earning over R400 000 than the LFS has earning over R360 000. Indications are that people seriously under-report their income in surveys – perhaps also to the taxman, but that is a story for another day.

More recent tax statistics revealed that over 7.1 million people paid personal income tax, which means that they earned more than R6 000 a month. This is the majority of the 10.8 million people working in the formal sector and needless to say it will translate into a median salary that is a lot further north than the claimed formal sector median of R4 800 a month.

Add to this the 820 000 private pensioners and it is clear that administrative data which comes with a form of proof shows wage surveys to be a lie. (Private pensions average about R6 000 at present when paid out and many of the people are over 65 years and would not pay income tax on this.)

But consider this: if you still believe the LFS survey on income gives a true reflection of reality, look at claims from government officials. In 2013 a total of 37% of the government employees stated that they received less than R4 500 per month. This while at the time, the lowest pay grade was R5 261 per month. (Payroll statistics reveal that less than 5% received less than R6 000)

Some 10% claimed they earned less than R1 500 per month and a few were slaves and earned nothing!

Big business is silent on minimum wages because they already pay at those levels and beyond in the main – however some SMME’s may have a problem.


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It would be interesting to see a reply from the role-players in the annual wage negotiations where a much worse picture is being created than the article suggests. Are those with work (unions) not abusing the situation at the cost of those in real need – the ones without work. And the impact on our labour productivity?

Hi Mike..

Always good to read your stuff. Beg to differ though – chat to the guys who fill your car. I think you’ll find that they make R2,000 (or less) and spend half of it on taxi fare. Lots of “domestics” endure R1,500 wage levels.

Try the supermarket till girls (I chat to a lot of folk) – taking home R3,000 after the labour broker through whom Checkers, etc runs the salaries takes their extortionate cut.. I used to run a labour brokerage (for IT guys) and wondered why the unions were so anti the business till I found out about that..

I might be out of touch these days but a lot of folk get by on very little and can’t complain when there are millions in a queue for work behind them..



Domestic Worker are in their own category and for sure they are the lowest paid but i believe that most of SA is honest and pays what they should but may only now use them say three days a week instead of five. But that is something we need to find out about and same for micro businesses. Those are the people who will not afford the minimum wage. but in essence you are right about the domestic workers

Sorry but the minister decided that from September 2015 the Forecourts attendant gets R1023.75 per week at 4.33 weeks per month that would be R 4 432.84. Then they also get a holiday bonus I understand that is about 110% of monthly salary or about R4900 once a year. They also get tips from motorists i am sure and Sunday and Holiday time pay. I would guess that the starting salary here will increase to R4800 pm in September 2016. Holiday bonus would increase that to effectively About R5300. Add about R60 in tips per day on average say 30 cars at r2 each which is little and i think the income would increase to over R6700 add a bit of overtime and Sunday pay and R8 000 is on. They tell you how little they get paid to get a bigger tip possibly.
See here on page ten for salary data. other document has holiday pay.

In South Africa there are about 500,000 active (employed) security guards. The ones I know (not many) earn between R2000 – R3000 a month and I am given the impression that’s what most of the earn. Further, 500 000 is a big number to skew the average wage down.
Of course, I have not considered the retail/restaurant/petrol attendants, a group that I’d think are also on the lower side.

The absolute minimum is R3101 pm and actual security guards are at R3 482pm in metro areas in their first years. In September 2016 this will increase and in Sep 2017 it goes over R4100pm. Then they also get shift allowance of R7.5 per shift which i agree only adds about R150 a month or so. They will also have 2nd and 3rd year pay-scales i understand.

But all the industries you mention have sectoral determination as they are the lower paying sectors. Bigger companies also often pay more than the minimum

Here is document which unions ect also police. See page 10 for wage data.

We pay our domestic help R200 per day for 6 hours – 9.a.m. to 3 p.m. One day a week. She also works for three other employers and has 6 days’ work each week. We all pay her the same amount – R200 per day. She is therefore earning R1200 per week. She also has three weeks paid leave per year over Christmas/New Year and the other usual benefits.

SMMEs will have a problem.

My garden guy who I pay R 200 a day to, earns R90 per day at a car wash for 5 days a week = R1980 per month + my R200 about once a month. His tips are negligible.

That is probably very true. The small car wash and the small garden Service will have problems here. The big firms will not have a major problem and that is also a problem as not many talk on behalf of small firms or farmers or spaza shops or even the part time lady at a vet. Nursery teachers will have a problem too sometimes but they work mainly half day for between R4000 and R5000 but the helpers get paid less say about R2500 or so. (but often half day

Farm laborers will also have a problem, that marginal guy you took on for some seasonal work, who was good then and you hired him, but has now just been getting useless will be on the street. The problem is the culture of job entitlement, meaning that once hired you can perform well below par. Farm labor are also very nomadic so just go from one job to another each time having to start at the bare minimum wage and never accumulate savings or assets..

True as you can see from comment above. But there are also farms that pay more but the small guy will get squeezed out and the bigger guys will go to technology and use less Farm workers. This and SMME and Domestics is were the danger is for minimum wages. But again most big businesses will make it easy.

My beef with the trade unions is that they push like mad to get better salaries for their workers but there never any productivity gains out of the deal. So in effect you are paying more for the same. A company only makes profits by increasing production, but if this is not forthcoming then companies need to reduce expenses and bye and large its salary bill is always quite sizeable. The company has 2 choices mechanise or reduce head count – both of which put employees out of work. So Trade Unions need to apply some circumspect when negotiating salary increases otherwise they will price themselves out of the market, and then there are no winners, just losers

I need to understand something here. Who is responsible for pushing productivity? Each company has an employment contract with its employees and that contract will have stated what is required of the employee. You have targets. Should those be met, this is what one receives.
From where i stand, bad management seems to be the issue in South Africa. Assertive management that leads by example. If your manager gets to work at 9am and leaves early, whether or not the rest of your staff is allowed to do that is immaterial. Productivity is an entirely internal issue.

Paracat, you seem to be implying that South Africa’s implementation of giving employment to previously disadvantaged individuals might be hindering the employment of competent staff. I could be wrong though, and if i am, please don’t be offended.
If i’m not though, I’d like to disagree with you on that one. While BEE encourages firms to give opportunities to PDI, no one has ever said firms must prioritise incompetency. Your implication is that there are no good black employees and that isn’t true.

Agree IF management is allowed unfettered, repeat unfettered ability to hire excatly who they wish to do.

That is absolutely not the case in SA.

In SA there is massive pressure to NOT hire the most competent staff available. So it is not an internal issue.

Productivity is key to growth in the economy. However unions see that as a way to do more with less of their workers. But it is likely to happen over time and much more economic activity will go under ground.
Some hard leftwing trade unions somehow always believe there is more money in the pot when there is not.

Interesting discussion. I have one of those micro enterprises.
I employ no one full time. My drivers only come in when I need them and I often drive the van myself to keep costs down.
My sales reps are only paid on commission but they take 10% of revenue.
My business will turn over 2,8 mill this tax year and through my aggressively lean business model , I’ll take home R600 000 after tax. ….
If there is a minimum wage imposed , I’ll just pay them the equivalent hourly wage but bring the drivers in less … I don’t care about driving a delivery van …. My lifestyle won’t change …
As for my domestic lady , she’s on 4 days a week now … She will go to 3 days a week if the minimum wage goes up … I can wash dishes too…

I understand the need for a minimum wage but please bear in mind that I contain my costs aggressively because I need to have a hedge against future shocks in this country. Electricity costs , vat increase , and the greatest potential threat , interest rate increases. So I use all my spare cash to pay off debt aggressively. I don’t spend it and I only buy income producing assets.

Imagine if there weren’t all these risks … I’d happily pay my staff double the minimum wage but I can’t …. The risks are too great.

Quick one. Did they ask for the salary before or after tax? I know a lot of lower wage/salary earners will tell you tell you they earn peanuts, but that is after SARS, medical aid, pension fund and union membership have taken a bite out of their salary before they have even seen it… Factor that in, and you get a different picture.
(On a separate thought, does that include work “perks”. We give our domestic travel money and provide lunch every day she works for us…)

Good points.

Ours gets breakfast and lunch + tea/ coffee/cooldrink on demand.

Taken to our personal doctor when the cANCer medical system fails. Our cost.

Gifts such as floor tiles for her home, a brand new Samsung washing machine delivered to her home at our cost.

She gets her annual leave when it suits her not us. When we go away for a while we pay her a full days salary for the duration of our absence.

Our previous maid had a brand new RDP house paid for by us. She then promptly died of Aids. Her 2 sons however, inherited the house and have a residential house free and clear of any encumbrances and growing in value that can earn an income. What do they do? Let family leeches stay in the house without paying rent.

Errata: while we are away she gets thew full days salary for aal days we are away.

Why cannot we edit typos?

Mike, no. I am a former auditor and accountant. We do have a wage problem in South Africa. Not only do employees who work the same position get paid differently, some also get underpaid. The gap between blue and white collar wage is astounding .I don’t blame business , I blame macro

It would be ridiculous if employees who work in the same position do not get paid differently. Your own post on targets in effect implies that this must be so.

Individuals peform differently no matter how hard they or management may wish it be otherwise.

Everything remaining constant, they should get paid equally. What should make up the difference are performance bonus, paid based on each employees level of productivity.

The other day when filling up my car in a typical suburban filling station the total came to something around R650. The petrol attendant asked me if I would pay by card or by cash. It intrigued me as it was not an insignificant amount of money to carry around. I asked him if people often paid these amounts in cash, to which he replied, “Yes, most people”.

My opinion is that this little anecdote is indicative of a massive non-tax paying cash economy that is skewing most statistics. SME’s save hugely keeping as much off the books as possible. While this keeps as much as possible out of the hands of greedy incompetent it is disingenuous in the long run as it discourages the type of investment that is good for the country.

While we have a government that seems intent on punishing those who are honest and hard working and supports the “Ironic Workers” (ironic because they don’t, anywhere) Viva cash.

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