Fun With Fake Statistics: The 5% "Increase" In Median Household Income Is Pure Illusion

[DamianTV]

http://www.zerohedge.com/news/2016-0...-pure-illusion

Subbmitted by Charles Hugh-Smith via OfTwoMinds blog,

The truth is the rich are getting richer and everyone else is losing ground as inflation chews through stagnant incomes.

Supporters of the status quo nearly wet their pants with joy when the Census Bureau reported that real (adjusted for inflation) median household income rose 5.2% between 2014 and 2015. Too bad it was completely bogus: the supposed increase in everyone's income is pure statistical trickery.

First, the marks who fell for it: here's the Huffington Post wetting itself with glee: Average Americans Just Got a Huge Income Boost.

This headline is risibly wrong on a number of counts. Most importantly, a notch up in median household income doesn't mean "average Americans Just Got a Huge Income Boost": It means that half of households in 2015 earned more than $56,516 and half earned less than $56,516.

It does not mean every household saw a boost in income.

Please follow along as I show you how median household income works. Let's start with a simple sample group of ten households. Household #1 earns $40,000, #2 earns $41,000 and so on, as each additional household earns $1,000 more than the previous household. Household #10 earns $49,000.

The median income of our group is $44,500, as 50% earn less than $44,500 and 50% earn more than $44,500.

As the economy expands, it adds two households earning $48,000 and $49,000 respectively. Meanwhile, the income of the two households that had earned $48,000 and $49,000 respectively each leaps to $250,000 each.

The median household income of the group increases to $45,500, but only the top two households experienced any increase in real income--and their income soared. The "average household" didn't make a dime more, even as the economy expanded and income for the entire group rose an astonishing 45%.

You see what happened as median household income increased: all the gains went to the top layer--"average" household income didn't rise at all. See how much fun we can have with misleading statistics?

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Full article and charts on link. Wheres Zippy?

[Zippyjuan]

You are right, not everybody gets a pay raise when median income goes up. Yes, median income means half the people earn more than that and half make less. If the rich get richer does that increase the median income? Let't take three families. One makes $20,000 a year, one makes $50,000 a year and the other makes $100,000 a year. Then let's give the rich dude a huge increase. Now he makes $150,000. Average income went up, but median income is still $50,000 because nobody else got a raise. $150,000 is still the highest income family and $20,000 the lowest and $50,000 the median.

Raising income levels at the bottom has the same non- effect. Let's double income at the lowest level. Instead of $20,000 he will now get $40,000 a year. Median income isn't up- average income is. The highest income family has more. The lowest family has more. But the median is still $50,000. So how do we increase median income? By giving those in the middle more money- allowing them to move up. They have to start getting more so that they can get above the median. More money for Wall Street billionaires or the poor has zero impact on median income. If incomes for somebody below the median does not increase above that median, the median cannot rise.

In order for the median income to rise, at least some people below the median income have to move above what was the median income.

The ZeroHedge example created new jobs which paid somebody without a job an above median income.

The median income of our group is $44,500, as 50% earn less than $44,500 and 50% earn more than $44,500.

As the economy expands, it adds two households earning $48,000 and $49,000 respectively.

[phill4paul]

I like statistics. I'll tell anyone I meet that I'm correct 99.87% correct, 3/4 of the time.