Ezra Klein: Means and Medians

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February 22, 2007

Means and Medians

I was thinking through Robert Reich's proposal to mandate that countries who want to trade with us set a minimum wage of half their median wage, and I ended up digging into some median wage statistics* domestically. For those fuzzy on the terms here, median means, essentially, in the middle. If I make $6, and Matt makes $7, and Tom Friedman makes $150, the median wage is $7. The mean is the average, so in this example, it would be $54.33. If we outsource Tom's job to a bright Bangladeshi making $1, my wage is now the median, and the mean is $4.66.

America's mean wage in 2005 was $35,448.93. That's the number you generally hear quoted. Its median, however, was $23,962.20. And if you want another example of rising inequality, in 1990, the median was 71% of the mean. In 2005, it was 67%. Indeed, over the same time period, the mean wage increased by 75%. The median only increased by 65%.

*This is why I'm fun at parties.

Also at Tapped.

February 22, 2007 | Permalink

Comments

Without knowing what the current median wage (and if they have a minimum wage and what it is) is in India, Indonesia, China, S. Korea, Thailand, Vietnam, etc. it is very hard to see if this is a solution that would result in a change in the global wage labor balance.

If, for instance, the median wage and the minimum wage are essentially in the same ballpark, this won't do anything.

A nice idea though, if the medium is closer to competitive world standards.

Posted by: JimPortlandOR | Feb 22, 2007 2:18:59 PM

Ooh, I was all ready to write some snark about our own minimum wage, but I see that he draws the comparison in his article. It sounds like a good idea. I'm more interested in some equally clever ways to establish environmental standards, esp. in regards to global warming.

Posted by: Sam L. | Feb 22, 2007 2:43:08 PM

Our median wage is only $24k? That means half of all Americans earn less than $24k?

How do Democrats possibly lose elections?

Posted by: Tony V | Feb 22, 2007 2:47:42 PM

I just want to point out Greg Mankiw's asinine objection to Reich's suggestion. (I say that with regret, because Mankiw is actually an incredibly smart guy.) Mankiw: "Does Reich pay his nanny, cleaning person, and gardener more than half the median wage of members of his family?"

I don't quite know how to respond to that because the premise is faulty, the logic is faulty, and the conclusion is faulty. But I'll try.

1) The median wage in his household is the same as the mean wage, so right away we have a bad analogy.
2) The median wage is earned by household members, but the cleaning person, et al, are not part of the household.
3) The wealth concentration of his household is not very great. The highest 50% of earners probably earns less than twice what the lowest 50% earns (they're both professors).
4) The price of goods for the employees Mankiw names is not set within the Reich household, so the income levels within the household have no bearing on their purchasing power.
5) Are you F***ing kidding me, Greg?

Seriously, when even Greg Mankiw makes such dumb arguments, it starts to become shockingly clear just what progressives are up against.

Posted by: jhupp | Feb 22, 2007 3:02:13 PM

You should send Mankiw an email jhupp, I know he reads them. Actually he's probably gotten a lot of mail along those lines already, so never mind.

Anyways, looks like half of the median wage for the U.S. translates into around $6 an hour. I don't know exactly how that's relevant, but something to play around with I guess.

Posted by: Korha | Feb 22, 2007 3:10:43 PM

He gives $7.50 as the "half the median" figure. Strange. I was doing some math of my own before I read the article. Assuming 40 hours of work a week, and 50 weeks of paid work a year, (ballpark assumptions all, of course) and taking Ezra's median of almost $24,000, I got a minimum wage of $6, which I don't think we want after all. If I take Ezra's mean, I get $8.88. Where did Reich's median come from?

Posted by: Cyrus | Feb 22, 2007 3:12:56 PM

I thought the median was $45,000 or so.

Posted by: APS | Feb 22, 2007 3:34:50 PM

I thought the median was $45,000 or so.

I believe that's the household median, not the individual median.

Posted by: paperwight | Feb 22, 2007 3:42:30 PM

This is why I'm fun at parties.

Yeah, well, that's not what I heard.

Posted by: Stephen | Feb 22, 2007 3:49:19 PM

Median hourly wage in 2005 was 14.15
http://www.bls.gov/oes/current/oes_nat.htm
- so half that would be ~7.08, still not great.

Posted by: Gar Lipow | Feb 22, 2007 3:52:10 PM

Good questions Cyrus, and it actually brings up an important point. Do we insist that a trading partner's minimum wage provide half the country's median wage to employees working 8 hours a day 50 weeks a year, or 12 hours a day 365 weeks a year? Obviously, if you insist that it is ok for people to work 90 hours a week every week, it's not that hard to get your minimum wage to provide half you median wage.

Posted by: Sam L. | Feb 22, 2007 3:56:45 PM

is this figure of a $24,000 median based on all people over 18 and under 65? or all americans (including children and elderly)?

Posted by: Frank | Feb 22, 2007 3:57:53 PM

The liberals' desire for equality of outcomes without regard to the individual's input assumes that all is luck...all is just one big roll of the dice or else no one could consider income redistribution "fair".

This begs the question that if one assumes that all is luck, then why get an education or train for that better job? Why try? It's all luck!!

Posted by: Fred Jones | Feb 22, 2007 3:59:06 PM

"If I make $6, and Matt makes $7, and Tom Friedman makes $150, the median wage is $7."

I thought the median would be $78 -- halfway between $6 and $150.

Posted by: Sean | Feb 22, 2007 4:00:06 PM

I thought the median would be $78 -- halfway between $6 and $150.
That's the mean between what Ezra is making and Tom Friedman (assuming Matt doesn't exist). Assume there's a list of people's salaries, from lowest to highest. The mean is (total cumulative salary)/(# of people). The median is the number in the middle of that list (meaning the # of people making more and making less than the median salary are equal).

Posted by: Korha | Feb 22, 2007 4:13:40 PM

I guess I should have taken that statistics class! Your blog readers is learning, Ezra.

Posted by: Sean | Feb 22, 2007 4:14:27 PM

It's all luck!!

No one claims that. And not coincidentally, no one calls for total equality of results.

Posted by: Sanpete | Feb 22, 2007 4:24:35 PM

...no one calls for total equality of results.

If equality of results is not the goal, then what's all this carping about?

I see massive amounts of people who care - go to school, train for jobs and in many other ways show us all that they believe it ain't just dumb luck. Here's a story that illustrates the vision of those folks.

A young woman was about to finish her first year of college. Like so many
others her age, she considered herself to be a very liberal Democrat, and
was very much in favor of the redistribution of wealth. She was deeply
ashamed that her father was a rather staunch Republican, a feeling she
openly expressed. Based on the lectures that she had participated in, and
the occasional chat with a professor, she felt that her father had for
years harbored an evil, selfish desire to keep what he thought should be
his.

One day she was challenging her father on his opposition to higher taxes
on the rich and the addition of more government welfare programs. The
self-professed objectivity proclaimed by her professors had to be the truth
and she indicated so to her father.

He responded by asking how she was doing in school. Taken aback, she
answered rather haughtily that she had a 4.0 GPA, and let him know that it
was tough to maintain, insisting that she was taking a very difficult
course load and was constantly studying, which left her no time to go out
and party like other people she knew. She didn't even have time for a
boyfriend, and didn't really have many college friends because she spent
all her time studying.

Her father listened and then asked, "How is you friend Audrey doing?"

She replied, "Audrey is barely getting by. All she takes are easy
classes, she never studies, and she barely has a 2.0 GPA. She is so popular
on campus. College for her is a blast. She's always invited to all the
parties, and lots of times she doesn't even show up for classes because
she's too hung over.

Her wise father asked his daughter, "Why don't you go to the Deans
office and ask him to deduct a 1.0 off your GPA and give it to your friend
who only has a 2.0? That way you will both have a 3.0 GPA. Audrey surely
needs it and you have plenty. Seems like a fair and equal distribution of
GPA.

The daughter, visibly shocked by her father's suggestion, angrily fired
back, "That wouldn't be fair! I have worked really hard for my grades I've
invested a lot of time, and a lot of hard work! Audrey has done next to
nothing toward her degree. She played while I worked my tail off!

The father slowly smiled, winked and said gently, "Welcome to the
Republican Party."

Posted by: Fred Jones | Feb 22, 2007 4:31:57 PM

Fred, again, no one argues for total equality. The goal is more equality, not total equality. That's been as obvious as can be all along.

I hope you can see why your story is completely irrelevant. But I fear you cannot, or don't want to.

Posted by: Sanpete | Feb 22, 2007 4:52:05 PM

The moral of the story: poor people wouldn't be so damn poor if they didn't throw so many friggin' parties. And keep that music down, you rascals!

Posted by: jhupp | Feb 22, 2007 5:03:01 PM

And the punchline of the story is, the girl's name is Jenna. Her father got his start in business by running a tax shelter for friends of the family, made his millions of a baseball stadium funded in large part by taxpayer money, and is a proud Republican because he sincerely believes he pulled himself up by his bootstraps, just like he's telling her to do.

I think the setup is a bit long for the joke, Fred, but otherwise, nice one. I'm impressed by the thought you put into writing that.

Also, what does "objectivity proclaimed by her professors" have to do with taxes? Do you even know?

Posted by: Cyrus | Feb 22, 2007 5:24:06 PM

Fred, I had a 7th grade history teacher who used a similar story to teach us about the "evils" of the progressive tax system. Too bad income isn't ANYTHING like grades... at all.

I could sit and rebut that entire line of thinking, but it's not worth it with you.

Oh and Ezra? I'd party with you. Call me if you're ever in Indiana! (haha)

Posted by: senior | Feb 22, 2007 5:25:34 PM

Man, I really need to make a file of Asinine Republican Parables.

Posted by: Jon O. | Feb 22, 2007 5:27:54 PM

If we outsource Tom's job to a bright Bangladeshi making $1, my wage is now the median, and the mean is $4.66.

I don't understand why the Bangladeshi has to be bright. This is Tom Friedman we're talking about.

Posted by: Ginger Yellow | Feb 22, 2007 5:37:19 PM

What exactly is the level of inequality we should be aiming for?

Posted by: Henry hazlitt | Feb 22, 2007 6:05:52 PM

What exactly is the level of inequality we should be aiming for?

One that better allows working people to avoid poverty and that better supports the consumer-driven economy. We don't have to worry about being exact. We're clearly on the lean side of that right now.

Posted by: Sanpete | Feb 22, 2007 6:15:37 PM

*This is why I'm fun at parties.

I for one would love to party with you. But then, my Intro Statistics TA accused me of nitpicking today because I was asking if the fact that once you have lived long enough to own a dog of your own, you have missed out on dying in childhood, like many who get factored into lifespan calculations do, could have anything to do with the fact that dog owners live longer. We should have our own little nerd party.

Posted by: Isabel | Feb 22, 2007 7:07:41 PM

but otherwise, nice one. I'm impressed by the thought you put into writing that.

I believe you meant "copy and pasting" rather than "writing," what with it being an incredibly old and hackneyed crap story.

Posted by: chdb | Feb 22, 2007 7:29:27 PM

You know, I'd be interested to see Reich respond to Mankiw's comments about him paying his domestic labor (nannies, housekeepers, and so on) half of his median wage. I bet he doesn't, but at the same time, he probably pays them enough to get by, which is Reich's point. Is less than half the median wage--say, a fourth or a fifth of it--enough to get by in some of the less developed countries. It's theoretically possible, but I doubt it. Here, it'd be a stretch, but in this country, we also have supplements, which I bet they don't have in other countries.

Posted by: Brian | Feb 22, 2007 10:57:45 PM

I think the setup is a bit long for the joke, Fred, but otherwise, nice one. I'm impressed by the thought you put into writing that.

He didn't write it. It's a standard joke Fred copied without giving credit.

Posted by: Alon Levy | Feb 22, 2007 11:19:54 PM

Also, Robert Reich is just plain wrong. For a start, Sweden has no statutory minimum wage, and neither does Norway. That, and the US median wage is on the order of $13/hour, which won't increase to more than $14.50 by 2009.

Posted by: Alon Levy | Feb 23, 2007 12:15:57 AM

If equality of results is not the goal, then what's all this carping about?

Because we've seen places where the aristocrats flaunt the wealth and the peasants starve. The guillotine is the usual solution.

Posted by: Phoenician in a time of Romans | Feb 23, 2007 4:31:25 AM

Alon

While it is true that Sweden doesn't have a statutory minimum wage, it does have collective agreements that produce effective minima a lot higher than in the US (relative to median earnings).

Posted by: Disinterested Observer | Feb 23, 2007 6:33:58 AM

Just to make it clear what I mean from my previous post - Alon Levy's point is accurate but irrelevant.

Posted by: Disinterested Observer | Feb 23, 2007 6:35:46 AM

I'm not sure "equality of results," with its hints of "social justice" (and who wants that??) captures the range of reasons for concern about wages. Another reason for not wanting to immiserate the workforce is that its success seems to be connected with the national well-being. One way to look at this is to ask, which sector participates in politics (unless one endorses non-participation). The answer is partly economic.

Or we can ask whether the national economy benefits from an impoverished workforce? Here is a quotation that refers to development economist Robert Lucas:

"Sustained technological improvements should not be treated as random strokes of good luck, but as an outcome of the education and training of people.... In the late 20th century the total value of human capital in the US economy -- the investment in education and training -- was larger than the value of physical capital... human capital investment is the only basis for indefinite _sustained_ economic growth in productivity per worker (I. Ehrlich) ... increased education ... explains a large part of the economic growth of the 20th century."

Which seems to mean, that we cut investment in human capital at our own cost.

Dan Tompkins

Posted by: Dan Tompkins | Feb 23, 2007 7:53:26 AM

"Sustained technological improvements should not be treated as random strokes of good luck, but as an outcome of the education and training of people....
---economoist Robert Lucas

I see massive amounts of people who care - go to school, train for jobs and in many other ways show us all that they believe it ain't just dumb luck.
---Fred Jones

Posted by: Fred Jones | Feb 23, 2007 9:21:09 AM

I think the most effective rebuttal to Fred Jones' little Republican fable above is "A Day in the Life of Joe Republican", by Thom Hartmann.

Posted by: DCNataro | Feb 23, 2007 9:29:32 AM

Fred, again, no one argues for total equality. The goal is more equality, not total equality.

So, how are you to motivate people to go to school and do better when you tell them that

1)it's all luck - why try?
2)you will take from those who *were* interested, *did* go to school and *did* take risks in business to make money?

That is the message you wish to send. If I heard that message (and believed it), why would I bust my hump to get ahead? Your message tells me its useless and even if I did succeed, it will be taken from me.

Posted by: Fred Jones | Feb 23, 2007 11:40:59 AM

Fred, you can empirically check whether inequality correlates to respect for education. It turns out it doesn't; in Sweden people go to school even though the Gini index is in the 20s.

Disinterested Observer, I know Sweden has collective bargaining arrangements. My point is that when Reich is saying a minimum wage is necessary to have a civilized society, he's ignoring the fact that there are other mechanisms of alleviating poverty. Further, among those mechanisms, minimum wages tend to be pretty ineffective, unless they're meant to be living wages from the start. France's is, so it's 53% of GDP per capita and Royal wants to hike it by 20% over and above inflation-adjustment; what Reich is suggesting isn't, because in the US it would only correspond to about 30%. What he's suggesting isn't that third-world countries get serious about reducing poverty, but that they adopt the US Democratic Party's platform.

Posted by: Alon Levy | Feb 23, 2007 2:54:03 PM

No need to push too hard. I be layin' back waitin' on my handout. Only inn 'Merica!!

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