The average government employee earns far more than the average worker outside of government – with salary increases above inflation, along with all the additional perks that come with working for the state.
And while the government wage bill continues to eat away the largest portion of the country’s budget, and finance minister Tito Mboweni has admitted that there is very little room to make changes.
This is was one of the key issues highlighted in the medium-term budget policy statement (MTBPS) delivered by Mboweni on Wednesday (30 October), which laid bare the desperate economic status of the country.
The government’s wage bill accounts for the largest portion of the national budget at 34%. This means for every R1,000 government spends, R340 goes to employee compensation.
According to National Treasury, between 2006/07 and 2018/19, total compensation spending on the main budget has more than tripled, from R154 billion to R518 billion. Above-inflation remuneration increases accounted for the largest proportion of this spending, it said.
Notably, the average remuneration in the public sector is higher than average remuneration in the rest of the economy, it said.
Data from Statistics South Africa’s Quarterly Employment Survey (QES) shows that average remuneration across 110 non-agricultural sectors and sub-sectors in 2018/19 was just under R273,000, compared with an estimated average remuneration of R352,000 for employees of national and provincial government.
By National Treasury’s calculations, the actual level of average remuneration for these employees is even higher – around R393,000.
“We estimate that public servants in national and provincial government earn about 20% of all wages earned in the non-agricultural formal sector,” Treasury said.
Where is the big spend happening?
While compensation spend has tripled over the last decade, in the same period the number of government employees rose by only 170,000 to 1.3 million.
Treasury claims that the reason for this massive disparity is due to the state hiring more highly qualified and technical personnel, with the whole state workforce receiving high increases every year.
Since 2010/11, the quarterly employment survey (QES) shows that average remuneration in the public sector has risen by an annual average of 8%, a figure that may be understated because of the effect of temporary workers, such as those employed by the Expanded Public Works Programme.
This is compared to an annual average increase of 7.2% in the rest of the economy. The gap between public- and private-sector remuneration growth has also widened over the past few years.
Salaries for civil servants has grown by about 40% in real terms over the past decade, Treasury said.
Between 2006/07 and 2018/19, the number of public servants earning R1 million a year increased from 9,600 to 29,000, primarily because of a growing number of high-skilled professionals, Treasury said.
“Average income for this group increased by about 8% over the period, rising from R1.2 million to R1.3 million.”
The increase in the number of employees in this category has driven the rise in total spending on this group from R5.8 billion to R38 billion, or from 4% to 7.4% of total compensation spending.
Within more specialised groups, including middle and senior managers, remuneration is higher and the distribution is larger. In total, however, these groups make up about 6% of the public service.
Doctors, for example, account for only 2% of the public service, but earn more than most other public servants within a wide range. The median doctor earns R781,000, while doctors at the 10th and 90th percentiles earn R472,000 and R1.2 million, respectively, Treasury said.
Across all government departments, average salaries range between R130,370 per year to R2.17 million per year, depending on grade. The largest portion of government workers are employed in grade 5 to grade 8 jobs, where the average salaries range between R258,312 and R448,039 per year.
What can be done?
Mboweni stressed that narrowing the country’s deficit and improving the composition of spending requires reductions in the growth of the wage bill, which accounts for almost 35% of the consolidated budget.
Government previously tried to trim the state workforce by offering employees early retirement packages, but this proved unsuccessful. Other attempts to cut state employee numbers have been met with backlash from unions.
New options to be considered to bring the wage bill under some degree of control include pegging cost-of-living adjustments at or below CPI inflation, halting automatic pay progression and reviewing occupation-specific dispensations for wages.
“Government has to discuss these matters with labour, and progress will be announced in the 2020 Budget,” Mboweni said.