Average Incomes
The New York Times has a story about the average income of Americans that simply amazes me for the utterly incompetent use of statistics.
The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy.
It tells you no such thing. The important number when trying to figure out how the average person is doing income-wise is the median, not the mean or average. There are some hints in the article about where the average person actually fits:
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
. . .
Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.
That means the median income of Americans is somewhere around $30,000 a year. The 0.25% of people who make over $1 million a year are hardly representative of the population as a whole, but they can pull up the average considerably. Whatever the point the author was trying to make gets lost in the fact that he's using the wrong data point.
If median income has dropped, that means most people are making less and therefore are right to feel poorly about the state of the economy. If it has risen, people should be feeling better about the economy since most people should be making more. Using that with other data can help show if the gap between rich and poor is growing or shrinking. Whether or not the average person is doing better or worse is the crux of what people want to know, and it frankly confuses the hell out of me that the author would do a story on incomes and fail to include that data.
