What's typical?

What's the best yardstick for measuring a typical American's income?

Sifting through the online publications of various government agencies I find two very different measurements frequently used. One is the per capita personal income. (Figures for 2002 are on page 6 of this .pdf file from the Bureau of Economic Analysis.) For the country as a whole, per capita income was $30,941 in 2002. By state, Connecticut was the wealthiest at $42,706 and Mississippi was the poorest, at $22,372.

Eligibility for some government assistance programs is determined by threshholds based on "median family income." This is a median, not a mean like the figures above, and its for a family of four -- which means it accounts for many families with more than one income. See this page from LIHEAP for recent figures. By this measure, the wealthiest state is New Jersey, with a median family income of $82,406. The poorest state is West Virginia at $47,550.

In the newspaper biz, we're constantly running articles -- especially in the business and personal finance pages -- that toss out hypothetical income figures: "Jim is making $70,000 a year and wants to invest $15,000 for retirement."

Several of my bosses will read that and think, "Poor Jim. How can he hope to save for retirement on only $70,000 a year?" My initial response -- which I'm guessing is more typical of most of our readers -- is "Jim, you lucky bastard, you're buying the next round."

Or consider this AP story on teachers' pay that was on the wires last week.

The average teacher makes a lot more than I do, but I don't begrudge them that. Considering the importance of their profession I think they're probably underpaid.

Yet the tone of the piece -- based on a study by the American Federation of Teachers -- seemed to be seeking pity from readers who may not have been doing nearly as well themselves. I suspect that the average teachers' income for last year -- $45,771 -- prompted at least as much envy as pity from readers. But this isn't obvious from the measurements above. Judging from per capita income, the typical teacher seems to be doing quite well. Looking at the median household incomes though shows that a family of four with a teacher as the sole breadwinner is definitely not keeping up with the Joneses.

The AP/AFT article goes on to explain that this average is skewed a bit by a graying population of teachers -- people with lots of seniority throw off the average. The more important figure thus might be the average income of those just starting as teachers, which was $29,564 -- and factor in against that the increasing cost of student loans.

Overall, most teachers saw their wages increase 3.3 percent last year, but had the cost of their health insurance increase by more than that, thereby eating up their raise and then some. (I think most of our readers can relate to that all too well.)

Even in California, where teachers average a national-high $55,693, educators will have a hard time relating to the struggles of hypothetical investors like "Jim."

So again I ask, what's the best yardstick for measuring a typical American's income?

And, given such a measurement, what's the best way to help the media to get a clue about the real incomes of real people in the real world?

Comments

[Riggssveda]

10 years ago, when we lived in the foothills of SW PA, near the West Virginny border, we made payments on a modest but adequate house that cost us $25,000 when we bought it in 1985. Our combined income was anywhere between $8-30,000 per year, and some years we had no health insurance while raising a young child.
Today, living just outside Philadelphia, we rent for $1000 per month (a bargain!), and the houses we see for sale that meet our basic requirements (safe neighborhoods, not too far from Center City, at least 2 bedrooms and some yard, single dwelling) easily exceed $250,000, and many are over $300,000. Half million dollar homes are commonplace.
We are not spoiled. We have known very hard times in our lives---going without food for over a week at a time, living on welfare, homeless moments. We know the value of things as opposed to the cost.
Yet it stuns us that, as well off as we have become, with an income of about $100,000 per year combined, decent houses still seem as far out of reach as they were in 1984.
How much moreso must it be for folks whose incomes more closely reflect the mean? We elect presidents who live in a bubble of entitlement so airtight that the first Bush could enter a grocery checkout line and be surprised by the scanner. We live in a culture that deludes itself with televised luxuries into thinking that EVERYONE "lives that way". Then after we buy this bill of goods our people beat themselves up for not being good enough to earn the money that will get them a place at the table.
It's an insidious souleater. I don't know what to do about it, other than pulling the plug on every electronic gizmo that beams the crap into our homes.

[Mike Kozlowski]

What surprises me is how high those state median numbers are. The federal median family income in 2001 was $51,407 (http://www.census.gov/hhes/income/income01/inctab4.html), but according to the state-by-state breakdown, the federal four-person-family income in 2004-05 is $62,732. Wages haven't risen that much over that time period, I don't think, so why the huge discrepancy? Is it just the four-person thing?

[Mike Kozlowski]

Ah, I had to read one footnote further down. By their calculations, the numbers go down drastically if the household has fewer than four members. Makes sense, since four-person families are going to be disproportionately ones with two adults. I think the Census numbers that I linked to are the more useful ones.

[derek g]

Does per capita income include just wages from work, or investment, etc?

Also, does it include just adults, or children and the retired?

I would be very curious to know what the average income is for the full time employed in this country.

[Mike Kozlowski]

Derek, table 685 of the Statistical Abstract (http://www.census.gov/prod/2004pubs/03statab/income.pdf) shows, if I'm reading it right, that for households where a householder worked 50 or more weeks at a full-time job, the median income was $58K in 2001; that's probably not changed appreciably since. You'll probably find table 691 interesting, too.

[Tom DC/VA]

With regional variations so wide, we need an IPPI - internal purchasing power index. Most of the variations are due to housing costs, so I think it would be easy to calculate.

[drieux just drieux]

Ah yes, back in the good old days when Joe was the 'sole bread winner' - or is that $70K the combined income of both parents, and the rest of the taxable income of the children as well?

[carla]

In answer to your questions at the end: First, I think it makes sense to ask people what they think is "reasonable"--show a shopping list, describe the size of a reasonable household in terms of square feet, include adjustments for transportation (car payments, gas prices, travel time), list the cost of health insurance and routine medical needs, etc. These things vary, of course--someone who gets good health insurance will have lower costs in those areas, but chances are they won't be the same people as the ones who get higher salaries. Pick a half-dozen occupations and income levels, and show how those conditions vary across those things. Include some seasonal workers (some types of construction, for example). And it has to include the real cost of housing--that's really the big thing. It may be possible to find cheaper housing in some parts of Philadelphia, for example, or in the burbs, but the commute then becomes impossibly long or expensive, or city workers have to live within the city (is that still true?). anyway, the problem I have with most hypotheticals is that they don't illustrate with, or show any real awareness of, real lives. That $70k/year--does it include child support payments to a first wife? Does Jim live in the city, or does he live in rural PA? Does he have a garden? A car? Does he hunt? Does he have a wife and kids at home? Is his income steady? Does he pay for health insurance? (Can you tell that I'd love to actually research and write that article?)