The recent report from the LSE Growth Commission recommends that median household income should take a regular place alongside GDP as a measure of how the economy is doing.
That brought back memories of the 1970s, when governments still often assessed economic effects of the Budget by quoting the cost (or benefit) to the average family with two children & a father on average earnings. Average was always just understood to be the arithmetic mean & as such a fair representation of how much ‘most’ ordinary families had to live on.
As the great inflation following the oil price shock started to drag more & more workers into income tax & the Government tried to calm union demands by referring to the ‘social wage’, one Labour MP – I think it must have been Audrey Wise – started to table a series of Parliamentary Questions asking for comparisons of median with average earnings. Some of us were quite impressed – in an age when knowledge of even basic statistics was spread so narrowly – that someone was alert to the existence of different kinds of average. Those of us who already knew that earnings/income do not generally follow a symmetric, bell-shaped curve (or normal distribution) but one which is skew, with a long tail towards the higher end of the income scale were even more impressed. On a bell-shaped curve [arithmetic] mean & median have the same value, but (right to left, reading up the hill) for a positively skew unimodal distribution the mean always exceeds the median. My memory tells me that the median was, in those day, only about 2/3 of the mean for earnings of men in full-time work.
Such lack of education on this point continued for well over a decade – I remember trying to explain to someone how it was that Mrs Thatcher was not (necessarily) telling lies when she talked about the new poll tax in relation to ‘average earnings’ of around £10,000 a year – ‘Nobody round here earns anything like that’.
In 2013 we seem to have gone the other way – I have been finding it hard to lay my hands on average (mean) earning figures for the UK – medians are everywhere now.
One reason why medians did not get so much attention in those days may have been that they could be difficult (or at least very expensive) to calculate from large surveys. Records were held in fixed format in fixed order on magnetic tape which could be read in only one direction. Sorting could take forever. Astonishing how we now take it for granted that sorting (of a sort) can now be done easily at the click of a button.
Links
LSE Growth Commission
Cabinet Papers: The Miners Strike and the Social Contract
[PDF] Introduction to sorting
YouTube: [Nerdy] Sorting Out Sorting
Related post
Assorted memories
