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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
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.
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
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