With less than six months to go before the election, it is time to be alert to the numbers and phrases used by politicians, especially when they are trying to tell you that you will be better off under their policies. On this score it is best to pay particular attention when they start talking about middle Australia.
When most of us talk about “average” we actually mean the “mean”. If 10 people in a room in total earn a combined $1m a year, then their mean earnings is $100,000 ($1m divided by 10).
That can be useful but it doesn’t tell us much about how many people in the room actually earn $100,000. For example, nine people in the room could earn $1,000 and one person earns $991,000. The mean (or average) would still be $100,000 but clearly it is a pretty useless statistic.
That’s why economists like to talk about the “median”. This is the point at which half the people in any group are below and half are above.
In the above example the median would be $1,000 – because half the people in the room earn at least that amount.
This is important when you hear a politician talk about who is, for example, benefiting from a tax cut. If they talk about “average” earners that might be rather higher than the “median” earner. It can get even worse when you hear them slip in the phrase “full-time”.
“Average full-time worker” might sound like a pretty commonplace worker – after all “average Australian” sounds pretty, well, “average”.
Fifty years ago there wasn’t really a need to worry about the difference. Back then average earnings were only about 5% more than the median and even the average full-time earnings were only 10% more than the median. But the mining boom years saw those on high incomes surge ahead of the pack. Now the average is about 20% higher than the median.
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In essence, the further the average gets from the median the more is being earned by the richest.
The latest Characteristics of Employment survey released this week by the Bureau of Statistics reveals that the difference between the two terms can be tens of thousands of dollars.
In August the median earnings – that point at which half of Australian employees earn less and half earn more – was $72,592. But the “average” earnings of Australian workers was $86,864, and the average of all full-time workers was $106,907.
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So if you hear a politician talking about how their policy will ensure those earning the full-time average wage will be better off, you might think they are targeting at least half of all workers. Instead they are caring about those who earn at least $33,000 a year more than what half of Australians earn.
And you also need to watch if they quietly slip the word “male” in to the policy announcement.
Men on average earn more than women – not only because of the systemic sexism of an economy where men get paid more regardless of industry or occupation but also because male-dominated industries and occupations generally pay more.
As a result, average male full-time earnings are $112,186 a year, compared with the average full-time earnings for women at $99,445.
Just how skewed things are is shown when we look at the percentiles.
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Half of all men working full-time earn at least $93,028 but if you are a woman earning that much, you earn more than about 75% of all women and about 60% of all women working full-time.
So gender matters, and so too does the type of work.
If you work part-time and earn $78,000, you are only just above the median of all workers but you earn more than 90% of all people working part-time.
Similarly, about half of all casual workers (those without leave entitlements) earn at least $34,216 – but that amount only puts you in the bottom 20% of all workers.
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Thus it matters what type of employment you have and (alas) your gender. But also, of course, what industry you work in.
If you work in hospitality and are fortunate enough to earn $83,200 then you earn more than 90% of all workers in your industry, and yet that would put you in the bottom 20% of all people working in mining.
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We can’t stop politicians and some sections of the media conflating “average” with “middle Australia”, let alone those on the average male full-time earnings, who actually make more than about three-quarters of all workers. But at least you can know where you stand – both within your industry and the entire economy.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
