Salaries should increase on average by about 11.8 percent in 2008, an employment report released on Thursday shows.

"We expect salary increases to average nearly 12 percent this year," said economist Mike Schussler who compiled the report for trade union UASA.

"Higher inflation makes for high salary increases".

In 2007 the average wage increase had been 9.2 percent.

This had been 2.7 percent higher than the average CPIX for 2007.

Schussler said many wage agreements were CPIX-plus-one percent or two percent plus productivity increases.

Schussler said the average big company salary stood at R13 500.

Speaking about the factors which determined earning capacity, Schussler said education still remained at the top.

Someone with a Masters or PhD degree was likely to earn 432 percent more over their total lifespan than someone with only matric.

Each year of tertiary education equated to 12 years of schooling in terms of increasing earning capacity.

"Education is a real return on investment," said Schussler.

Race remained the second most significant determinant of earning capacity.

White workers on average still earned 5.5 times more than black workers.

"The white population group had the highest income which is about 450 percent more than black income and 400 percent more than coloured income."

Indian people earned 70 percent of what white people did.

Schussler said the difference was probably due to the apartheid legacy of unequal access to education.

He said the difference was "declining slowly but surely".

Two years ago whites earned about six percent more than blacks.

Schussler also said income differentials within race groups were also growing.

Some white people were becoming poorer and more black people were earning more.

Schussler said what field one qualified in also determined one's earning capacity.

In South Africa, law, business and agriculture remained the best-paid sectors while services like hospitality and the retail industry remained the worst.

People between the ages of 40 and 44 earned the most.

People over 30 generally earned more than those in their teens and twenties.

Belonging to a trade union also made a difference to earning capacity.

"Workers who belong to a trade union earn 108 percent more than the average worker."

Workers not represented by a trade union could earn only 70 percent of the national average salary.

Workers in Gauteng earned the most, while those in the Eastern Cape earned the least.

Eastern Cape workers only earned 60 percent of what the typical employee in Gauteng did.

Most people in South Africa worked for small and micro businesses and also ended up earning less than those in big companies.

Government tended to pay 180 percent more than the average wage, said Schussler.

He said the report once again emphasised the importance of education in steering economic growth.

"If we spend more time and effort in getting the education system fixed and [people] get through and have more ability; this would be the largest driver of growth," said Schussler.

Also attending the report release was TV news anchor Riaan Cruywagen.

Cruywagen, an UASA union member, acted as master of ceremonies for the event.

Sapa