PERSONAL INCOME ESTIMATES FOR SOUTH AFRICA: Trends for the past five years and possible outcomes for 2020
TRENDS IN PERSONAL INCOME ESTIMATES (2015 – 2019)
The BMR Income and Expenditure Model was used to obtain the estimates provided in this report. Population and parameter weights were used to ensure the overall accuracy (validity) of the income estimates of the model. The updated results indicate that, following relatively high annual growth rates of approximately 7.5% during 2016 and 2017, growth rates in personal incomes have slowed to about 5% during 2018 and 2019.
Income inequalities remain a thorn in the flesh of South Africans
The analysis reiterated the existence of income inequality in South Africa as 73.8% of the adult population earned only 8.8% of cash flow-related incomes in 2019.
Despite the almost equal gender population distribution between females and males, females remain at the lower end of cash flow income earnings. Approximately two-thirds of cash flow income was earned by males during 2019.
POSSIBLE PERSONAL INCOME OUTCOMES DURING 2020
COVID-19 and the resulting lockdown are expected to have far-reaching economic growth, employment and personal income implications for South Africa. Given the troubling and uncertain times surrounding the COVID-19 pandemic, it was decided not to provide projected 2020 estimates, but rather conduct scenario analyses to provide possible personal income outcomes for this year.
The pandemic will not just result in a large number of people losing their jobs and hence their incomes being affected, but people not losing their jobs will also earn lower incomes during 2020 because of temporary business closures, temporary pay-cuts, lower salary increases, etc. In the absence of COVID-19, cash flow income is estimated to increase by 5.9% during 2020. A decline in cash flow income is expected due to job losses and the subsequent impacts on compensation growth as per the two scenarios outlined below. It is estimated that 800 000 job losses (scenario 2) will result in cash flow income estimates that are R265 billion lower compared to the baseline estimates for 2020, translating to a -1.7% change in cash flow income compared to 2019 estimates. Similarly, 1.6 million job losses (scenario 3) are estimated to result in cash flow income estimates that are R461 billion lower than the baseline estimate for 2020, translating to a -7.4% change in cash flow income compared to 2019 estimates.
Middle income groups are the most vulnerable
The employed middle class working in skilled jobs in the formal sector of the economy is expected to be hardest hit by COVID-19 and lockdown-related job losses. Compared to the expected growth in the absence of COVID-19, those earning between R 447 001 and R899 000 per annum are anticipated to suffer the greatest income losses.
The recovery process will most likely not be quick and sufficient support needs to be provided to individuals who are expected to be most impacted by the challenges arising from the current economic environment.