Beware the average income stat

September 10th, 2013 at 2:00 pm by David Farrar

A reader e-mailed in asking:

I’d be interested to know if 70% of New Zealanders actually earn less than $43,000.

This is in relation to some claims on another blog.

The stat is correct, but it is a fairly meaningless stat. When you see stats about the average or median for all adult New Zealanders, you need to remember this is including hundreds of thousands of New Zealanders who are not actually in work! It includes the 15 year olds at school, the tertiary students in full-time study, the non-working spouses, the beneficiaries, the retired etc.

The more useful stat for me is what is the average hourly income of someone in employment. Because it is people in employment who fund the rest of society.

The latest average hourly wage is $27.55 an hour. That equates to $55,000 a year if you did a 40 hour week. The average or mean is different from the median, but I use it here as Stats NZ only provide the mean in their quarterly stats.

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47 Responses to “Beware the average income stat”

  1. Doc (91 comments) says:

    “70% of New Zealanders actually earn less than $43,000″

    You’ve pretty much nailed this in your post. It’s misleading to use the word “earn” in that sentence – it should read:

    “70% of New Zealanders actually receive less than $43,000″

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  2. vto (1,131 comments) says:

    ” Because it is people in employment who fund the rest of society.”

    Farrar, you indulge in the exact same distortion that you try to dispel. Your use of the word “fund” is deceptive. Many of those ‘funders” would get nowhere and have no life without some of the non-funders, main example being mothers.

    More horseshit from the horses arse

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  3. Adele Keys (39 comments) says:

    I don’t think the average hourly wage for people in employment is more useful. Not for some purposes anyway. The 43,000 statistic is used to show the unequal distribution of wealth.

    By saying that the average income of employed people is $55,000 you distribute directors and CEO’s and doctors 6 and 7 figure salaries amongst everyone to arrive at that figure. However it is certainly not representative of what most people are earning.

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  4. wikiriwhis business (3,998 comments) says:

    “The latest average hourly wage is $27.55 an hour. That equates to $55,000 a year if you did a 40 hour week”

    Utter National Socialist propaganda

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  5. scrubone (3,099 comments) says:

    By saying that the average income of employed people is $55,000 you distribute directors and CEO’s and doctors 6 and 7 figure salaries amongst everyone to arrive at that figure. However it is certainly not representative of what most people are earning.

    That is fairly obvious. But when you talk about “average earnings” most people assume that means people are under-paid.

    In reality, it’s perfectly normal for a western society to have a large number of people who are not paid at all.

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  6. Skttrbrain (26 comments) says:

    So, if three workers had wages each of $13.75/hour, $13.75/hour and $200/hour the mean average would be $75.83/hour.

    Happy days, right? Clearly the workers on $13.75 would just need to upskill, or something.

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  7. scrubone (3,099 comments) says:

    The 43,000 statistic is used to show the unequal distribution of wealth.

    Between a 3 year old toddler and a doctor with 10 year’s experience.

    Nope.

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  8. Chuck Bird (4,883 comments) says:

    So, if three workers had wages each of $13.75/hour, $13.75/hour and $200/hour the mean average would be $75.83/hour.

    The average would be $75.83/hour and the mean would be $13.75/hour.

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  9. SGA (1,028 comments) says:

    @Chuck Bird
    Not quite – the mean (what most people usually think of as the “average”) would be $75.83/hour and the median would be $13.75/hour.

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  10. scrubone (3,099 comments) says:

    The average would be $75.83/hour and the mean would be $13.75/hour.

    The mean is what most people think of as average.

    I think you mean median (or even mode).

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  11. Nigel Kearney (1,013 comments) says:

    >Clearly the workers on $13.75 would just need to upskill, or something.

    They would need to live on $13.75 plus whatever is taken in taxes from the $200 guy. But more likely they would get greedy and vote Labour for a higher tax rate then the $200 guy would move to Australia. After that they would just be on the bare $13.75. Unless of course the $200 guy was a public servant who was laid off by National then there would be an extra $200 in the kitty to spend on the other two.

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  12. Griff (7,700 comments) says:

    What really happens is half the 13.75 guys have moved to aussie and the 200 guy imports more 13. 75 ones from India or else were in the third world while using his surplus income to speculate on the share and property market driving the relative value of 13.75 down .

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  13. scrubone (3,099 comments) says:

    But more likely they would get greedy and vote Labour for a higher tax rate then the $200 guy would move to Australia. After that they would just be on the bare $13.75.

    I put this together a few years ago.

    http://halfdone.wordpress.com/2010/05/26/tax-cuts-fairness-and-pie/

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  14. RightNow (6,994 comments) says:

    vto:

    ” Because it is people in employment who fund the rest of society.”

    Farrar, you indulge in the exact same distortion that you try to dispel. Your use of the word “fund” is deceptive.

    Quite right. Not all people in employment fund others.
    For example a family with 2 young children and two income earners, one getting $30k p/a and one getting $13k p/a, will get $4,000 more in tax credits via Working for Families than they will pay in PAYE.
    WFF for this family = $9620 ($185/wk) and PAYE totals $5624.

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  15. Left Right and Centre (2,979 comments) says:

    Skttrbrain 2:27 pm mean and average are two words for the same thing genius.

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  16. Skttrbrain (26 comments) says:

    > They would need to live on $13.75 plus whatever is taken in taxes from the $200 guy.

    So, are you advocating a ‘living wage’ where that $13.75/hour unit of labour can pay an appropriate level of taxes (and provide a net contribution beyond being a part of their community and a productive worker) rather than get what may be a subsistence wage, and a subsidy via another unit of labour (via the tax department)? (ditto RightNow at 3:34pm)

    Nutshell: Wouldn’t a better scenario be workers paid a return for their labour that does not require tax-payer subsidisation of low salary/wages?

    Or am I giving you too much credit, and you really think WFF should simply be ditched with no back-up (and assuming that those workers’ costs are suddenly able to be met within that $13.75/hour return), probably because they made poor decisions or some-such, in which case the full-time worker probably deserves to not be able to pay his/her bills?

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  17. Left Right and Centre (2,979 comments) says:

    Chuck Bird 2:53 pm The *mode* is $13.75 an hour, as well as being the median.

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  18. Skttrbrain (26 comments) says:

    > Skttrbrain 2:27 pm mean and average are two words for the same thing genius.

    Thanks for the lesson Left Right and Centre. I suggest you Google “mean average”, “median average” and “mode average”.

    (What do they actually teach in Math these days?!)

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  19. Left Right and Centre (2,979 comments) says:

    What you really want is not the average wage…. which tells you exactly nothing…

    But the *median* wage rate per hour. But you don’t want to stop there.

    You want to keep digging down, splitting up workers into income bands of say every 10% top to bottom. And doing yearly income and a whole raft of other statistical measures and analysis. All of that is out there now. If you can stay awake long enough for any of it to get through your head.

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  20. Left Right and Centre (2,979 comments) says:

    Skttrbrain 4:03 pm Listen cunt – you don’t need to put ‘mean average’. One of those words is redundant, comprende you little newbie arseitch faggot?

    In this commonwealth country… it’s called ‘maths’… not ‘math’. This is not America, it’s NZ based cyberspace. Got it dipshit?

    What else have you got noddy? Keep going… I can’t fucking wait…

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  21. Skttrbrain (26 comments) says:

    > But you don’t want to stop there.

    Absolutely right. I’m oddly of the philosophy that making analysis on hard statistics is worthwhile, and simplistic headline data is not worth the paper it’s written on.

    In this case DPF has said expliclty he used Statistics NZ mean income data – which is exactly meaningless in the context of the skewed example above (mine, and the $27.55/hour “average”).

    > All of that is out there now. If you can stay awake long enough for any of it to get through your head.

    Sorry, I fell asleep at this bit – can you explain your point?

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  22. RightNow (6,994 comments) says:

    Skttrbrain – I personally would prefer targeted assistance like WFF in preference to implementing a ‘living wage’.

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  23. Skttrbrain (26 comments) says:

    > I personally would prefer targeted assistance like WFF

    Agreed, but when wages haven’t kept pace with productivity gains there’s sill room for movement there too. And in effect WFF *is* a tax-payer funded subsidy for low wages.

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  24. KiwiGreg (3,255 comments) says:

    Unless people actually starve to death, they are all living wages (and the market would correct for that too as the supply of labour dried up). We don’t need WFF or any of this government shit. There’s a market out there which works this stuff out.

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  25. Skttrbrain (26 comments) says:

    > Skttrbrain 4:03 pm Listen cunt – you don’t need to put ‘mean average’. One of those words is redundant, comprende you little newbie arseitch faggot?

    Sometimes people used additional words for context. In the use of “mean average” it was to convey a distinction between mean, mode and median, rather than to send you down the road of the other meanings of “mean” (to denote, miserly, base, cruel etc.).

    Happy to help.

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  26. Yoza (1,872 comments) says:

    The ‘average wage’ measure is misleading and is generally used to provide the illusion that the general population is well remunerated. The media generally avoid using the median wage as this provides a more somber snapshot of how many people struggle with accruing pitifully low levels of capital.

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  27. Chuck Bird (4,883 comments) says:

    @SPG & Left Right and Centre & Scrubone

    Thanks for the clarification. I had the idea as some of you suspected. I did mean the median.

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  28. itstricky (1,830 comments) says:

    but I use it here as Stats NZ only provide the mean in their quarterly stats.

    The “income survey” does, but not for this year, yet…

    http://www.stats.govt.nz/browse_for_stats/income-and-work/Income/nz-income-survey-info-releases.aspx

    http://www.stats.govt.nz/browse_for_stats/income-and-work/Income/NZIncomeSurvey_HOTPJun12qtr.aspx

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  29. Left Right and Centre (2,979 comments) says:

    Skttrbrain 4:29 pm Listen cunt – you don’t need to dumb it down on this blog, ok? Save that shit for your Stuff comments, yeah?

    This aint kindergarten mate. This is KB… where men are men and even the women are men. Got it? Happy to help you noddy.

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  30. gump (1,647 comments) says:

    @DPF

    That’s somewhat misleading of you to multiply the average hourly wage by forty hours.

    Shouldn’t you be multiplying it by the average working week? Which would be somewhat less than forty hours given the large number of part-time employees in our workforce.

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  31. itstricky (1,830 comments) says:

    Forgot the rest of the speil. Extrapolating in stats is a no no but I can not see that 2012 would be vastly different from this year. Last year the median equated to 42k. So you can say with certainty that last year 50% of workers recieved less than 42k.

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  32. nickb (3,687 comments) says:

    targeted assistance like WFF

    LMAO!!!! Targeted?

    Making 80% of NZ’s working parents beneficiaries?

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  33. Skttrbrain (26 comments) says:

    > Skttrbrain 4:29 pm Listen cunt etc. etc.

    Cool story.

    So, anyway, I think you were about to get to your point at 4:05pm – what was it exactly (y’know, to stay on topic)?

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  34. Yoza (1,872 comments) says:

    itstricky (499) Says:
    6:13 pm

    Last year the median equated to 42k. So you can say with certainty that last year 50% of workers recieved less than 42k.

    From your previous link:
    - median weekly income from all sources – up 1.8 percent from $550 to $560

    – median weekly income for those receiving income from wages and salaries – up $6 (0.7 percent) to $806

    Which would make the median wage $29120.

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  35. Skttrbrain (26 comments) says:

    itstricky (5:47pm)

    In that first link (for the June 2012 quarter) median hourly earnings are $20.86, a little less than mean $27.55 in DPF’s post – which goes to show that “mean average” and “median average” can lead to quite different discussions.

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  36. Left Right and Centre (2,979 comments) says:

    Skttrbrain 6:23 pm Everything is in there dick. Read it a few times shittbrain… some shitt might enter your brain.

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  37. Skttrbrain (26 comments) says:

    > Everything is in there dick.

    Oh, OK. I had no idea “there” was a panacea. :)

    Glad to see someone so helpfully directing us “shittbrains” to the answers, and directing us to a clear interpretation of what it all means! Thanks so much!

    Seriously though, did you want to contribute, or are you too manly to form a coherent point?

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  38. bhudson (4,740 comments) says:

    – median weekly income for those receiving income from wages and salaries – up $6 (0.7 percent) to $806

    And that makes the median wage $29k ?

    Interesting maths.

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  39. Paul Marsden (998 comments) says:

    bhudson is the closest so far.

    The “mean” average wage in NZ is circa $28,000pa. ie 50% of all wage/salary earners in NZ, earn around this amount on average pa.

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  40. Yoza (1,872 comments) says:

    And that makes the median wage $29k ?

    I should have written median income. According to Statistics NZ if “median weekly income from all sources – up 1.8 percent from $550 to $560″ then $560 x 52 = $29120.

    I think “median weekly income for those receiving income from wages and salaries – up $6 (0.7 percent) to $806″ must exclude anyone not receiving a wage or a salary.

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  41. Left Right and Centre (2,979 comments) says:

    Skttrbrain 7:06 pm

    I made my contribution. I don’t answer to a gutless piece of shit 20 comment faggot either.

    Have you ever tried leaving your keyboard shittbrain? That’s what I was doing. Spending part of my lifespan away from the fucking keyboard. I’ve got you summed up cunt… another loser with his cock jammed hard to the internet…. wannabe intellectual fucking pussy piece of shit poser. Glad to be of help genius.

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  42. itstricky (1,830 comments) says:

    In that first link (for the June 2012 quarter) median hourly earnings are $20.86, a little less than mean $27.55

    Yes, as expected really because there’s a greater “clump” around low wages that there is around high wages. i.e. the are a lot more people earning an outlier low wage than there are earning an outlier high wage. So the median is skewed to a lower value. To put the other responses together, for 2012:

    Median income = $29k
    Median wage = $42k

    So, in 2012, 50% of wage earners were on a salary of less than $42k.

    That’s quite close to the statement above that DPF is trying to disprove but it isn’t 70% (at least as far as we know because these are last year’s stats).

    It’s certainly a lot closer than the magical dreamt up average of $55k, which is also, to put it in DPF’s own terms, meaningless. He has suggested he can’t use the median because it isn’t available – strictly that is true – but I’m pretty sure he also knows that it’s going to be $10k+ lower than the average so it kinda suits.

    For a spread and natural phenomena like this, median is a far more precise measure. Average in this case flattens out the high & low earners and give a false, higher, value.

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  43. Skttrbrain (26 comments) says:

    Left Right and Centre

    You’re so cute! It’s so great to have a meaningful debate with the likes of you – now I can see why there are constant threads about the left blogs being terrible for debate compared to with the manly men and women at KB.

    itstricky

    Right on. Easiest way to see the volume below the “average” (all three would be ideal) would be to show whether NZers are renumerated appropriately across the spectrum – particularly in the context of productivity rises – and whether or not these have been evenly returned to all workers over time – following Simon Bridges’ lead “The real way to get wages up is through better productivity and more profitability, which results in more money in workers’ pockets.” (27 August)

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  44. Skttrbrain (26 comments) says:

    Interesting paper here on that last point (pdf) – at least as a starting point – the method/partisanship of the author should be considered. On the method – ‘average’ wage, for example, comes from three sources: QES, CEO and LCI (so misses some SMEs who pey themselves).

    Headline info is:
    “The average wage shows [workers] receiving only a quarter of labour productivity gains. These trends have resulted in a lower labour share of the economy’s output…” and “While increased labour productivity may allow larger wage increases, the labour market is not producing them”.

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  45. Skttrbrain (26 comments) says:

    Link: ojs.victoria.ac.nz/LEW/article/download/1714/1557

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  46. simonway (387 comments) says:

    It includes the 15 year olds at school, the tertiary students in full-time study, the non-working spouses, the beneficiaries, the retired etc.

    Those people don’t need money, having transcended human things like food and water, so how much they get is meaningless.

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  47. Left Right and Centre (2,979 comments) says:

    Skttrbrain 9:07 am Who’d want to debate with you dickhead? Get a life!!

    And what do you know about any one particular user on a ‘right wing blog’? That’s right… fuck all.

    What do I know about this person? Fuck all. First impression is that this person is yet another gruesome internet twat… fuck there’s a lot of them.

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