Question

12.10 What’s the average? The Census Bureau website gives several choices for ‘‘average income’’ in its historical income data. In 2013, the median income of American households was $51,939. The mean household income was $72,641. The median income of families was $63,815, and the mean family income was $84,687. The Census Bureau says, “Households consist of all people who occupy a housing unit. The term ‘family’ refers to a group of two or more people related by birth, marriage, or adoption who reside together.’’ Explain carefully why mean incomes are higher than median incomes and why family incomes are higher than household incomes.

Answer 1

Incomes are generally skewed, with some family members being the main bread-earners and earning higher salaries compared to those in the family/household working only part-time. Additionally, there can be few generations with each new generation earning more than the earlier ones because of higher education levels and more opportunities for modern skill-sets. This skews the distribution towards the higher side, hence the mean income ends up being higher than the median distribution. (latter being unaffected by outliers).

Households might include students living in a housing unit, who are not earning or generally do only part time jobs. However, family by definition will include a group of people with a senior member earning money with much more likelihood. Hence, the chances of a family having no earning member is lower than that of a household. Hence, family incomes are higher than household incomes.