Thursday, March 7, 2013

Is the phrase “Typical Household Income” obsolete?

Is the phrase “Typical Household Income” obsolete?

It has for several generations now been well understood what was meant by phrases like “middle income”, “working class” and “typical household” to describe what I believe does not exist. I just reviewed a Congressional Research Service (CRS) report entitled “The Distribution of Household Income and the Middle Class” (November 13, 2012) and the conclusions presented in the report about the range of incomes that might make a household “middle income” where absurd to the Nth degree.

I recently wrote about three statistical terms that are relevant to this discussion: median, mean and mode. Consider carefully the estimated income distribution graph below which is based on census data gathered in 2010.

Mean (Average Household Income)

The average household income in 2011 was $69,677. The words “average” and “mean” are synonyms; the mean the same thing (pun intended). But nearly 2/3rds of the households earned less than the mean income, how could this be the “middle” or “middle class”?

Median (the “Middle”)

The middle point in any statistical population is what is called the “median” and median income in 2010 was $49,445; in 2011 it was $50,054. The middle quintile (1/5th or 20%) of in households in 2011 earned between $38,521 and $62,434. The “mean” or “average” income that was just mentioned is not even in the middle quintile!

The CRS report concluded that this range was too “narrow” and could not “account completely for those commonly considered to be middle class.” The report went on to suggest that 2nd, 3rd, and 4th quintiles together might be “middle class”. The range of these three quintiles together is from $20,263 to $101,583.

Is it even possible that the top of the middle class is roughly FIVE TIMES what the bottom of middle class is? Households earning $20,000 are NOT in the same income class as households earning $100,000!

Mode (Typical Household Income)

If any statistical point on the income distribution curve could be properly regarded as “typical” for “working class” households, it would be the “mode”. The mode is the highest point in the curve; it is the point where the largest portion of the population is measured; it is point where any given household is most likely to fall.

The mode in 2010 was between $15,000 and $19,999 at just over 6%. The modal point in 2011 was somewhat more complicates; many people in the modal range lost their jobs so the new mode was split with 5.9% falling in the $10,000 to $14,999 range and 5.9% in the $20,000 to $24,999 range. Is this “middle income”, $10,000 to $24,999?

Perceptions Do NOT Match Reality

Surveys indicate that the population considers a much higher range of incomes to be “middle income” than is indicated by statistical analysis. A Pew Research Center study concluded that the middle income range might be from $30,000 to $99,999. But you are roughly THREE TIMES as likely to have a household income between $15,000 and $19,999 (6%) as to have a household income between $95,000 and $99,999.

Surely we all know that typical, working class, middle income families do not earn incomes approaching $100,000? Apparently not! In the same study, 46% of the households with incomes of $100,000 or more self-identified as “middle class”.

Rethinking Typical, Working Class and Middle Income Households

Shouldn’t middle income be someplace near the middle? Shouldn’t typical be the income range that any given household is likely to fall into?

Maybe people living in a household with greater than $50,000 (the median) should look over their shoulder and see that the big bump in the curve is someplace between $15,000 and $24,999? The typical working class person is nowhere near the middle.

Maybe people living in a household approaching $100,000 should look over their shoulder and see that the middle is roughly half of their income level, roughly $50,000. Managers, professionals and even many teir-1 laborers are not really close enough to the middle to call them selves middle income.

Confucius said, “The beginning of wisdom is to call things by their true names.” There should be no shame in being successful and earning a dignified wage, but it is very important to recognize the actual fact that you may no longer be typical, working class, or middle income.

The typical, working class or middle income person is essentially a wage slave and is dependent upon social programs such as food stamps, Medicaid, Medicare, Pell Grants, Social Security and tax credits. Any thought of reducing these subsidies to the growing population of working poor people are unconscionable.

Obscene Wealth Has Reduced Typical, Working Class People to Poverty

To make a few people obsenely wealthy, many … no, most … people must be insecure and poor. Many conservatives imgine themselves to be numbered amoung the wealthy because they are so much better off than the majority of the people they know, but their relative wealth is NOT the cause of wide-spread poverty in the typical, working class households.

That being said, it isn’t helpful that so many people who enjoy household incomes aproaching or in excess of $100,000 regard themselves as a class appart from the majority of the people whose incomes are so much lower. Or that the relatively wealthy people often work only to protect their own wealth even when doing so injures others with lower imcomes.

Wealth Inequality in America – A Viral Video That You MUST Watch!

An unknown YouTube subscriber known only as Politizane has posted a video that has gone viral on the Internet. This video has over 3,520,683 views since it was posted November 20, 2012.

This video presents infographics on the distribution of wealth in America, highlighting both the inequality and the difference between our perception of inequality and the actual numbers. The reality is often not what we think it is.

If you haven’t seen the video yet, watch it now. I promise you that no matter what you currently think of wealth inequality in America, you will have to revise your thoughts after watching it.