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SA employees not in poverty

Corrupt numbers make myths creating a false reality.

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.

COMMENTS   12

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Interesting…to say the least……excuse the pun…

Will DTC make sure that this article on minimum wages is overlooked? This expose rather stuffs up the hysteria around the gini coefficient. Easier to scream about taxpayers getting away with murder.
So much more politically ok to tax trusts and inheritances that have been taxed over and over and over ad infinitum. So much easier to attack the institution of marriage and say that spousal bequests are unconstitutional……..vomit.

DTC should go down on it’s knees and thank the taxpayer instead of always insulting and demeaning them.

We all know that the DavisTC has a (ideological) madate to produce a “progressive” taxation regime. Call me cynical, but I interpret this as doublespeak (to quote Orwell) for the redistribution of “white capital” (to quote the ANC). “White capital” long ago left the employ of the civil service, hence the disinterest in taxing the “typical wage”, as Mike put it.

Schussler makes very valid points, which add in a very positive way to the public debate. His points should be factored into every politicians’ and economists’ thinking (fat hope that can happen for some of these!).

I disagree however, that it is problematic that the MEDIAN income is not taxed. SA is NOT an homogeneous society. The population is largely a third-world society that contains a significant (but small) pocket of first-world members. Thus it is entirely to be expected that when you select the median point, that you will find that the half the of the population on the “poor” side will be those that simply cannot afford to pay tax anyway (or they pay less than they take out from the tax-base).

Schussler’s stats story changes completely if you replace the MEDIAN with the MEAN.

As an aside, because it was not the point of Schussler in his article, but I have a real problem that there are too many economists in SA whose daily pre-occupation is to merely DESCRIBE SA’s economic problem WITHOUT actually putting forward a practical SOLUTION that the politicians can take – with credible enthusiasm – to the voters.

Politicians will NATURALLY seize upon the solutions that could work. But there is a real paucity of such solutions.

It is my point that ECONOMISTS have a real responsibility to put serious effort into putting REAL solutions into politicians hands ASAP.

And currently, NONE of them appear to be thinking hard enough about doing this! And that has to be a worry for all of us.

Oh Mike, don’t you get it ?

The ever pervasive victim and entitlement mentalities, dictate that, the poorer you claim you to be, the more entitled you are to more and more and, more, so demand more in wages, loot the coffers, and then loot some more, because after all, you are the ‘poor’ hapless victim, whose very existence has to be a burden unto everyone but yourself.

Inaccurate, the figures may be, but that’s their story, and you can bet your house on it, they’ll be sticking to it.

Whilst standing in the queue outside the beautiful customer focused Home Affairs office in Randburg early one morning last week, I had the opportunity to observe the staff arriving for work. Lots of cars, mostly quite new. And then a senior honcho (I know he was senior because the security guard went over to lick his a*se) rocked up in an S class Mercedes – not new, but still helluva expensive to run. No minimum wage evident amongst this lot.

I think we’re missing the point here – it doesn’t matter whether the median income is R3000 or R8000 per month. The absolute amount is immaterial. The real issue is how far this median income goes in terms of meeting the needs of the ‘typical’ worker. My take on the question is: not far at all. Take for example the official inflation number – i don’t see a 5.6% (or whatever it is) increase in my expenses for the same basket of goods and services i procured last year (trust me, my basket doesn’t consists of caviar, expensive champagne or shopping at Woolworths). The ‘true’ inflation a ‘typical’ worker is exposed to is much higher than the official rate. Then factor in poor/nonexistent services (e.g. education, health services, security, etc.) the public sector is supposed to provide – already paid for from official taxes and other additional post-disposable-income taxes – compelling the worker to procure the very same services in the private sector. In the private sector the ‘typical’ worker has to deal with additional layer of costs added on services/goods as a result of poor productivity, price fixing, cartels, monopolies and other malfeasance we’ve read about in the public press involving private-sector companies in SA. One cannot but feel sorry for the ‘typical’ worker in this country – talk about the ‘working poor’. Mike, yes, SA employees ARE in poverty!

I agree that a large majority “ARE in poverty!”. Yet I am always baffled by the fact that these poor people (all the world over) continue procreating. Bringing innocent souls into a world of poverty is a crime in my opinion – the big elephant in the room. Serious consideration should be given to voluntary sterilisation in order to break the cycle or the state of poverty will be stunningly horrendous in 20 – 30 years time. Anyone who thinks the poor will eventually be enriched by any government / social programme obviously believes in Father Christmas.

Another possibility is to allow child grants for a maximum of two children, but I can’t see the ANC falling for that one, as they have absolutely no vision. Yes, it’s a massive elephant, and a symptom is seen in the seemingly endless migration of people towards Europe. That’s not going to stop anytime soon.

Old Magnus PI,

Try receiving “inflation related” increases for 10 years in a row and see how your living standard drops.

How can you ignore the unemployed (officially 25% – probably a lot higher) when calculating medians or means? Their zero incomes have a major influence on these averages.

You are living in a dream world. The average none governmental worker is earning much less than R 3000.00 per month. At present I know workers earning between R 70 to R 78.00 per day for 5 days a week. They are hard working and knowledgeable. Do the sum. There are no work at municipalities or other governmental institutions.
Get to work, walk the walk and stop looking at misguided figures. Go to you local businesses, even the major stores, petrol stations, etc, any non governmental institutions, even the big corporate s and ask the workers how much they earn. You will get a reality wake up. Then you can apologize for your totally clueless article. The majority of people earning a wage is far less than R 3000 per month. Start by checking the local big brand store around the corner.

End of comments.

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