The refrain is heard often that the typical worker only earns R3 000 per month. The figure never changes and many reports and headlines have screamed about the poor worker.
The number comes from the quarterly labour force survey but is only released annually in the Labour Dynamics publication from Statistics South Africa. On the face value it looks as if workers are getting poorer and they can afford less, yet many numbers do not make sense if this number is correct.
For example, how does one explain that we see about four hundred thousand new car sale a year and more than double this number in the the official second-hand market? Cars are expensive and take years to pay off and this statistic suggests that South Africa has about six million people who earn well over R6 000pm to afford these cars.
Furthermore, the Labour Dynamics publication also states that the median salary has declined in real terms by 16% since 2009.
The data did not explain sales and spending in the economy. I analysed the Labour Dynamics data and found it strange that 37% of employees in the civil service earn a salary at least 10% below the minimum government minimum wage. Administrative data from administrative records such as public service commission data also show that less than 5% earn the minimum government wage.
In April 2015 the absolute full-time minimum wage in the government was around R88 000 or R7 335 a month. This includes bonus and pension contributions, but excluding indirect benefits such as government subsidy to the government medical scheme.
The same “mistake”, that people claim they earn less than the minimum wage, also applied to employees of State-owned enterprises. My research of actual salary data painted a much different picture, as these employees are paid rather well.
Again, minimum salaries of large SOEs are much higher than government departments and often exceed R8500 a month.
Moreover, there are more than 20% of state employees and 16% of SOE workers who also claim they earn less than the minimum salary of R2 000 – what domestic workers typically earn. More than 75% of government employees also claim they earn less than the median wage in government, which is approximately R14 500 a month, excluding pension contributions.
Clearly this is a lie.
But several new sources of data relating to the income of South Africans emerged lately, and they paint a totally different picture.
Firstly, the National Credit Regulator (NCR) has been collecting income data as people declare their incomes to lenders such as banks and retailers. These individuals normally have to produce a payslip to prove their income and the NCR data is based on 22 million transactions. This is much more than the 60 000 people the Labour Force Survey questions.
Clearly 22 million credit transactions do not represent 22 million people, but with an average of 3.4 loans per person it suggests a sample of 7 million adults. That is robust and strong.
It shows that in 2014 the typical monthly income (not only salary, as some are also pensioners) was well over R8 000. This suggests a rise in salaries and explains the magnitude of other metrics, such as car sales.
It is not only the NCR that claims this. Data from debt counsellors also suggest that the average monthly income of people seeking assistance is around R8 000. Over the past year there were 80 000 adults who applied for counselling and they had to supply documents to show their income and debt.
Furthermore the South Africa payment system shows that big formal sector company employees are typically taking home close to R10 000 per month. This indicates that the median salary (the amount in the middle if you arrange all salaries in a business from the higest to the lowest) of a typical big company is around R12 000 per month. This is the gross salary and excludes taxes, pension, medical aid and garnishee orders. There are about 3 million people who contributed to this research.
These statistics show that the official income surveys are not accurate; it actually proves to be more of a myth. And when there is a wrong diagnosis, the wrong medicine is precribed. The wrong perceptions are created and the wrong people are blamed such as CEOs and entrepreneurs.
Moreover, the 23.5 million credit active consumers in the country dwarfs the 15 million people who work in the formal sector. There are vast numbers of people on social welfare who are credit active too as well as some private pensioners which may in fact indicate that even this median may be too low.
Double digit salary increases, which has become the rule these days, also do not suggest declines in real incomes.
My problem is that most academic research has relied on surveys and did not pair this with consumer spending or tax statistics. Yet, this academic research is used is used to make policy decisions on things such as minimum wages or increases in the farming sector and the like.
For example, using the survey data for minimum wages in the economy and following International Labour Organisation (ILO) recommendations of the minimum salary being two thirds the typical wage, would result in a wage of around R2 000 per month. The fact is almost all minimum wages are already over this level. It also shows that the typical median wage has not really increased when we look at the Labour Force survey data.
Another interesting fact is that South Africa may possibly be the only country in the world where the median income does not get taxed. Currently, the lowest personal income tax threshold starts at double the survey typical wage. This is something the Davis Tax Commission has overlooked so far.
Corrupt data is creating myths that are fast becoming very difficult to rectify and we cannot afford to keep the insiders in the economy (employees) believing they are the ones who are in poverty. Those in real poverty are those without work and fixing that is the only way forward.