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April 15, 2004

Median incomes falling

Crooked Timber: On the other hand
Brain Weatherson at Crooked Timber takes issue with a CNN / Money article. Read the whole thing as they say.
However, there appears to be one piece of statistical sleight of hand in what Brian himself has to say. That's his concentration on the idea that median income, whether rising or falling, is a good measure of how the economy is doing generally. Surely the median income is more a measure of distribution than anything else ? If we had a rise in the inequality of distribution of incomes, with the benefits going in greater proportion to the rich than the poor, we could see total incomes, and the arithmetic avereage income, rise, while the median fell ?
If unemployment rose, we would expect the median income to fall. Yes ? If tax cuts favoured the rich, this would decrease the post tax median income ? Yes ?
We are of course being told all the time that unemployment has risen, that the Bush tax cuts favoured the rich and that inequality is increasing. So we would expect the median income to be falling, and this may or may not be a good thing dependent upon your other political views. But it says nothing we did not already know about the performance of the economy in general, nor about average incomes, nor about GDP growth.

April 15, 2004 in Economics | Permalink


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