Wednesday, October 22, 2008

Income Distribution

Any mention of redistribution of wealth in America would normally scupper a politician's ambitions, but Barack Obama has managed to preserve his lead in the polls while also saying that he wants to “spread the wealth around”. And there is a lot of spreading potential: income distribution in America is the widest of the 30 countries of the OECD.
Two quick thoughts.

First, any spreading around of the wealth is not likely to change this chart. As I have written about before, income statistics like these do not include the earned income tax credit and other poverty reduction methods. Higher tax rates on the upper income individuals also won't be reflected here.

Second, what does average mean here? Is it median or mean? I believe the red dot is a mean value, but I would really be interested in how the median income compares between countries. I am also not sure how each decile is determined. Do they use a median or mean average of the top 10% of earners to determine the value for the top decile? If it is a mean value, I am kind of surprised it doesn't break $100,000 in the US.

via The Economist


Anonymous said...

This chart doesnt seem to represent anything relative to Wealthy people.

it specifys low-to-mid income average wages

If this is all the information available it shows the USA is just right

Fat Knowledge said...

Hi anon,

The yellow hashes specify a decile. So the left most yellow line is the bottom 10% of earners and the right most yellow line is the top 10% of earners.

According to the graph the top 10% of American earners average just over $90,000 and second decile (top 20%) average just over $50,000.

It shows that the US has both more high earners and more low earners than the rest of the world.

As for whether that distribution is "just right" that is a judgment call each American will need to make for themselves.

Audacious Epigone said...

"Average" must necessarily be "mean" here. If it were median, the red dot would be between the 5th and 6th decile lines for every country (presuming that the first vertical line represents the 5th percentile, though it might be the 0th or 10th, I'm not sure). Anyway, there are countries where the red dot is too far to the right for it to be mathematically possible for it to be the median.

Fat Knowledge said...


Good point. I was thinking that if the decile lines were a mean average for that decile then maybe the red dots could be median, but if they are beyond the 6th hash that wouldn't work.

So, the red dots are mean, and I would think the deciles are based on the 5th percentile of that decile (5%, 15%, 95%) based on the top percentile (can't be 100%, don't think it is mean, and unlikely to be 90% as what is a 0% salary?).

I wanted to compare the median incomes between countries, and while that isn't there I guess the 5th hash mark is 45% percentile and would be close enough to compare.

Audacious Epigone said...


Yes, I think we're right about the deciles being at the X5%s. 0% and 100% can't reall be represented in a percentile distribution (think back to your standardized test-taking days--you might've been in the 99.9th percentile, but even if you scored perfect, you weren't listed as being in the 100th percentile).

You could look separately at both the 5th and 6th marks to approximate median incomes with even greater accuracy.

Post a Comment

Note: Only a member of this blog may post a comment.