Which Median Income?

by Reihan Salam

Felix Salmon writes:


The national median income is $52,029; in New York state it’s $55,980; and in Manhattan (New York county) it’s $68,295. Playing around with a paycheck calculator, I reckon that in order to pay $68,295 in annual income and payroll taxes, a NYC resident with one standard allowance would have to earn about $192,000 per year. And of course if you start taking further deductions for things like children and mortgages, that number rises significantly.

It’s harder to work things out nationally, since taxes vary from state to state. But an Illinois resident with the same single deduction would have to earn about $186,500 in order to pay $52,000 a year in taxes.

In other words, using Bernie Dan’s definition, it’s reasonable to conclude that “rich” is about $190,000 a year. Which seems reasonable to me.

This kind of discussion is a bit silly, but I’m drawn to it like a moth to a flame.

While perusing the latest Census numbers on median household income by family size, I found the following numbers for households in New York state:

2-person families: $56,845

3-person families: $67,292

4-person families: $82,587

5-person families: $80,441

6-person families: $77,582

7-person families: $79,704

Remember the following about Census money income:

Census money income is defined as income received on a regular basis (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, social security, union dues, medicare deductions, etc. Therefore, money income does not reflect the fact that some families receive part of their income in the form of noncash benefits, such as food stamps, health benefits, subsidized housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents which may take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Data users should consider these elements when comparing income levels.

Note the way that Census money income starts to decline after family size increases beyond 4 people, which could reflect the fact that more recent immigrants, particularly those with lower-than-average levels of educational attainment, tend to have more children. Once we factor in noncash benefits, the picture starts to look somewhat different, though perhaps not dramatically so.

What Felix seems to be telling us is that a single person earning $190,000 is pretty well off. That’s not terribly controversial. Is the same true of a 5-person family living on the same income in a high-tax, high-cost jurisdiction? Absolutely, in some abstract sense. But the 5-person family earning $80,441 that chooses to leave New York city for Houston or Iowa City is almost as well off in material terms as the $190,000 5-person family they leave behind. Indeed, the quality of public schools in Iowa is high enough that it might give families there an even bigger economic edge over their New York counterparts: fewer dollars can be spent on private schooling or supplementary private tuition, and the value of instructional time is higher. 

The central analytical problem is that psychic income is hard to measure and we don’t do a very good job of valuing the public services we consume. To understand the real pecking order in American life, we ought to have a better handle on both concepts. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.