Median household income


Median household income

The median household income is commonly used to generate data about geographic areas and divides households into two equal segments with the first half of households earning less than the median household income and the other half earning more.[1] The median income is considered by many statisticians to be a better indicator than the average household income as it is not dramatically affected by unusually high or low values."[2] The U.S. Census Bureau uses the following definitions of median and mean income:

Median income is the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. Mean income (average) is the amount obtained by dividing the total aggregate income of a group by the number of units in that group. The means and medians for households and families are based on all households and families. Means and medians for people are based on people 15 years old and over with income.[3]

Household income is not to be confused with family or personal income. Household income is often the combination of two income earners pooling the resources and should therefore not be confused with an individual's earnings. Even though the term family income may sometimes be used as a synonym for household income, the U.S. Census Bureau defines the two differently. While household income takes all households into account, family income only takes households with two or more persons related through blood, marriage or adoption into account.

Contents

International statistics

Median household income for selected countries is shown in the table below. The data for each country has been converted to U.S. dollars using purchasing power parity (PPP) (obtained from the Organisation for Economic Co-operation and Development).[4]

This is what each equivalent adult in a household in the middle of the income distribution earns in a year.

Data are in United States dollars at current prices and current PPPs for the reference year.

Rank Country 2007[5]
1  Luxembourg 34,407
2  United States 31,111
3  Norway 31,011
4  Iceland 28,166
5  Australia 26,915
6  Switzerland 26,844
7  Canada 25,363
8  United Kingdom 25,168
9  Ireland 24,677
10  Austria 24,114
11  Netherlands 24,024
12  Sweden 22,889
13  Denmark 22,461
14  Belgium 21,532
15  Germany 21,241
16  Finland 20,875
17  New Zealand 20,679
18  France 19,615
19  Japan 19,432
20  South Korea 19,179
21  Slovenia 18,860
22  Spain 18,391
23  Italy 16,866
24  Greece 15,758
25  Israel 14,055
26  Czech Republic 12,596
27  Portugal 12,515
28  Estonia 9,836
29  Poland 9,113
30  Slovak Republic 9,071
31  Hungary 8,531
32  Chile 7,851
33  Turkey 5,940
34  Mexico 4,689
 OECD 19,229

Median household income and the US economy

Since 1980, U.S. gross domestic product (GDP) per capita has increased 67%,[6] while median household income has only increased by 15%. An economic recession will normally cause household incomes to decrease, often by as much as 10% (Figure 1).

Median household income is a politically sensitive indicator. Voters can be critical of their government if they perceive that their cost of living is rising faster than their income. Figure 1 shows how American incomes have changed since 1970. The last recession was the early 2000s recession and was started with the bursting of the dot-com bubble. It affected most advanced economies including the European Union, Japan and the United States.

The current crisis began with the bursting of the U.S. housing bubble, which caused a problem in the dangerously exposed sub prime-mortgage market. This in turn has triggered a global financial crisis. In constant price, 2010 American median household income is only 0.75% higher than what it was in 1989. This corresponds to a 0.04% annual increase over a 21-year period.[7] In the mean time, GDP per capita has increased by 32.5% or 1.35% annually.[8]

US real median household income 1967 - 2010.png


Equatorial Guinea Australia Iraq (war torn)
GDP per capita (PPP) $31,837 (2009) $39,231 (2009) $1,900
Biggest export Oil Coal Oil
Life expectancy 49.5 80.6 69.3
Infant mortality 87 5 68

A comparison between median household income and GDP per capita for developed countries is shown in the chart below. There is only a weak correlation (R=0.16) between GDP per capita and median household income.[9]

International Median Household Income.png

See also

References


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