Comments on: Rising Incomes and Falling Income Statistics

By: notsneaky

notsneaky — Fri, 12 Sep 2008 02:37:52 +0000

But Bryan's essentially right in the sense that with more than three people, like say 260 million more, the thing about the median is not likely to work, unless you're getting HUGE inflows into the income pool (or unless the income distribution is symmetric, which it ain't). Which is precisely why folks who look at these sort of things like to concentrate on the median and not the average.

And keep in mind that these are usually intertemporal comparisons, like 1975 vs. 2005. But there were folks entering the income pool in 1975 too, it's not a new phenomenon or anything (except possibly for immigration but then you gotta make that case with some hard numbers).

By: Bryan

Bryan — Tue, 09 Sep 2008 22:09:20 +0000

oops I stand corrected!

By: Martin Brock

Martin Brock — Tue, 09 Sep 2008 14:47:11 +0000

Conventionally, the median of three values is the central value, and the median of four values is the average of the two central values, so the median presumably does fall when you enter the room, unless the three billionaires have precisely the same wealth.

By: Bryan

Bryan — Mon, 08 Sep 2008 22:22:41 +0000

Actually if I walk into a room with 3 billionaires, the median income is unchanged and the average income falls.

By: Atabrat

Atabrat — Mon, 08 Sep 2008 13:36:23 +0000

It's Simpson's paradox. The same issue came up when UC Berkeley was accused of discriminating against female applicants, when in fact it had a small bias against men.

http://en.wikipedia.org/wiki/Simpson's_paradox

By: kebko

kebko — Mon, 08 Sep 2008 11:29:10 +0000

Even without immigration, the newest people in the statistical pool would be 18-23 year-olds getting their first job, so that even if there were truly income stagnation on a national scale, the trend of income growth over a lifetime would mean that few individuals would actually be experiencing personal income stagnation. Of course, outside of special circumstances, young people entering the workforce today have much higher expectations than their parents did.
The statistical problem, I would suggest, is made worse by the fact that young people are staying in school longer & staying single longer, so that they have many years that show up as low household income, even though these are decisions that will be economically beneficial in the end. And, older people are living in semi-retirement or retirement longer, showing years of low income which are actually the result of the wealth they have accrued over their working lives.
It would be really interesting to see the numbers disected to see how much of the various levels of income are explained by these factors.

By: dave smith

dave smith — Mon, 08 Sep 2008 11:18:29 +0000

It is not just the immigrants. It is also the new households formed by newlyweds, new college grads, the splitting of households by divorce, etc.

Their incomes are nearly all lower.

This whole income inequality debate should come down to the nature of the flow of new households into the pool.

And Don's letter illustrates that perfectly.

By: Alex

Alex — Mon, 08 Sep 2008 10:44:54 +0000

The assumption must be that the newest person in the room is the shoeshiner. Are there statistics that bear this out? Does America's immigrant population have an income lower than the mean or median? I would assume that to be the case, but is it?