Research and analytics group Intellidex has published a new report looking at public-sector worker pay in South Africa.
The report, which was commissioned by Business Unity South Africa (BUSA), uses the same calculations as the IMF – which considers the public sector as ‘general government’. This corresponds to South Africa’s national and provincial departments and public entities, but exclude local government and state-owned companies.
Based on this consideration and data from Stats SA, the size of the public sector has risen by over 18% between 2010 and 2020, from a little over 1.8 million to a little under 2.2 million.
Of these, about 50% are employed by departments in provincial government and 21% by departments in national government.
Intellidex’s shows that public servants have seen a steady increase in remuneration since 2006/07, which has been driven by five factors:
- A once-off change in remuneration in 2008/09 when occupational specific wage dispensations (OSDs) were introduced for a wide range of more skilled public servants (doctors, lawyers, nurses, teachers), with the introductions accompanied by significant once-off increases in basic pay;
- An extended series of wage agreements in which basic pay was adjusted at a rate greater than inflation;
- Cost-of-living adjustments are applied to wages paid at each of the 16 wage levels in the public service, each of which is divided into a number of distinct notches. Over time, there has been a degree of grade inflation, which has resulted in the upward regrading of posts;
- A system of “notch progression” in which public servants are entitled to incremental increases in basic pay over and above the cost-of-living adjustment provided they achieve a minimum score on their performance evaluation. In the past, different systems of pay progression applied in different parts of government, but the 2018 wage agreement provided that all public servants would qualify for a 1.5% pay progression increment each year;
- Faster than inflation growth of non-wage employment benefits, especially medical aid and a range of allowances, the largest of which is the housing allowance to which all home-owning public servants are entitled.
The combined effect is that these factors force a faster-than-inflation rise in average remuneration, with inflation-adjusted average remuneration rising 44% in the past 12 years from R272,000 in 2006/07 to R393,000 in 2018/19, Intellidex said.
“The result is a dramatic shift in the distribution of personnel across various income levels,” it said.
“Using inflation-adjusted income bands, (there is a) declining share of personnel earning less than an inflation-adjusted R20,000 per month – from 85% of staff in 2006/07 to 48% in 2018/19 – and the rising share of staff earning above that figure.
The fastest-growing income band consists of staff earning above an inflation-adjusted monthly salary of R30,000, the number of whom has increased over fivefold in 12 years, it said.
“(There is) a twelvefold increase in staff earning between R30,000 and R40,000 per month, and a fivefold increase in the number of staff earning above R60,000 per month.”
Intellidex said that the increase in top-earners in the public service has been driven by a dramatic rise in the number of medical professionals – overwhelmingly doctors – rather than ordinary public servants, administrators and policy makers.
The population of the latter increased by 65% (4,700) between 2006/07 and 2018/19, but the number of medical personnel at the top end of the income distribution in government has increased far more quickly – from under 5,000 in 2009/10 to over 13,000 in 2018/19, it said.
Critically, the increase in payroll costs has outstripped the rate of growth of the economy, with the result that these costs consume a larger and larger share of GDP, said Intellidex.
“The extent to which the increase in remuneration has had an impact on the rest of government’s budget is somewhat obscured by Treasury’s habit of reflecting compensation as a share of total spending.
“While this has grown, the rate of growth is slower than the rate of growth of debt service costs,” it said.
The above increase in wages should be considered alongside both private sector wages and the current state of poverty in the country.
Stats SA’s latest Quarterly Employment Survey (QES) for Q2 2020 shows that the average monthly earnings paid to employees in the formal non-agricultural sector increased/decreased by 4.2% quarter-on-quarter.
The average worker gets paid R21,455 per month (down slightly from R22,395 recorded in Q1 2020), down from R21,796 in the same period in 2019. This equates to approximately R257,460 per year.
Bonus and overtime paid to employees decreased by R16.4 billion (-26.2%) from R62.6 billion in March 2020 to R46.2 billion in June 2020.
Data from the Pietermaritzburg Economic Justice & Dignity Group’s latest household affordability index shows that the majority of the country are living below the upper-bound poverty line in South Africa, with millions surviving on grants:
- There are 12.78 million children receiving Child Support Grant (valued at R440 a month);
- There are 3.67 million pensioners receiving an Old-age Grant (valued at R2,110 a month);
- There are 30.4 million people (55.5% of the population) living below the upper bound poverty line of R1,268 a month;
- There are 13.8 million people (25.2% of the population) living below the food poverty line of R585 a month.