Friday, April 2, 2010

Median earnings higher in U.S than in Europe.

I have previously written about the fact that the U.S has higher average income than European countries. This is not only due to the rich earning more. The U.S also has higher median income than most European countries. Here is median income in PPP adjusted dollars in the "mid-2000s" by the OECD.

I should warn that estimates of median income are much less reliable than GDP per capita.

1 Luxembourg (35.200)
2 United States (27.768)

3 Switzerland (27.228)
4 Norway (27.098)
5 Netherlands (25.876)
6 Canada (25.507)
7 Austria (22.916)
8 Denmark (22.796)
9 UK (22.306)
10 Ireland (21.402)
11 Iceland (21.317)
12 Australia (21.068)
13 Finland (20.915)
14 Korea (20.892)
15 Japan (20.879)
16 Germany (20.586)
17 Belgium (20.388)
18 Sweden (19.895)
19 France (19.047)
20 New Zealand (16.798)
21 Spain (16.456)
22 Italy (16.140)
23 Greece (15.996)
24 Portugal (11.927)
25 Czech Rep. (10.760)
26 Hungary (8.714)
27 Slovak Rep. (7.838)
28 Poland (7.326)
29 Mexico (4.350)

France, which Social Democrat Bruce Bartlett thinks is a pretty positive role model for America, has a median income 31% lower than the U.S. Do you think the median American would voluntarily reduce his or her standard of living by 31% to get "better restaurants; and greater income equality"?

Not only does the educated class do much better in the U.S compared to Europe, the median earner are also better of here.

But why let objective facts stand in the way of leftist theory?

16 comments:

  1. Interesting, but it could be compared with hours spent as well;
    GDP (PPP) per hour worked for the USA vs France decreased from 2.3 in 1950 to 1.06 in 2009 (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_hour_worked). If the trend continues and these data are reliable (the measure is a ratio of two values which each is relatively hard to estimate). If you believe these data, the gap is closing...

    Working in a global company I am curious to why the US colleagues make more money than we do in Sweden, in the same company (quite a lot actually). The US people certainly put in more work hours but in actual production we produce twice as much per "full time equivalent".

    /Stefan

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  2. Hi again,
    your Bruce link does not work ?
    /Stefan

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  3. Stefan:

    Comparing GDP per hours worked between France and the U.S is very misleading, since the French have restricted the hours worked of the low productive members of society (and the last and less productive hours of the day for everyone else).

    If the U.S tomorrow passed a law that only people with Phd and MBA:s could work, productivity per hour worked would skyrocket.

    The standard of living would plummet.

    You are comparing apples and oranges if you compare the fuller distribution of hours work with a restricted one.

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  4. What would the numbers look like if we broke out White Americans separately from the number for all Americans combined?

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  5. Tino what about the France wage inequality compared to America's wage inequality as far as the top one percent goes? I'd add that you use standard of living but that goes past your income in what makes you happy. Some people enjoy more leisure time among other things. Denmark is considered the happiest country in the world currently and I bet they look closer to France than they do America.

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  6. Comparing Sweden and Denmark today and the Sweden and Denmark of the 70-80s is impossible.

    Sweden and Denmark became what I call functional socialist states and what Ronald Reagan called "control and regulation socialism". Another name is corporatist aka fascist, not fascism as a pejorative but as a statement of fact as regards to economic policy. Sweden and Denmark went in to deep sclerosis and the welfare states was close to collapse during the 70-80s.

    Both Sweden and Denmark bit the bullet in the 90s, massive deregulation, privatization and massive tax cuts. Reformed the welfare systems. In fact Sweden and Denmark became poster boys for so called neo-liberal economic reforms, they worked like magic. Sweden and Denmark are in such good shape today because of pure neo-liberalism, not as most left leaning bloggers and pundits argue in the US because of social democracy. The functional socialist policies ruined Denmark and Sweden , neo-liberal policies saved them. It became a pyrric victory, because of the massive expansion of the welfare state and taxation public spending and taxation is above 50 % of GDP. It's impossible to cut entitlements.

    So why are pundits and left leaning politicians wanting to drag the US to the same disaster Sweden and Denmark went trough when they instead should use the medicine that cured Sweden and Denmark. Its as Tino writes pure ideology gets in the way of facts and history!

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  7. @Stefan: I find it surprising that you say that Swedes make more for the same job at the same company than their American counterparts. The reason I'm surprised is because of the recent articles written about Ikea.

    One good way to compare (at least in my mind) is the minimum wage in the two countries. What is the lowest normal wage in Sweden? Or how much do people at fast food restaurants make? In the US, that figure is $7.25 USD/hour.

    Of course, the raw number isn't that simple, because it doesn't take into consideration that amount that is actually taken home. And of that amount, how much is spent on various necessities that might be free elsewhere (like health insurance).

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    1. Minimum wages are not a good way too compare standards of living between countries. The scandinavian model does not rely on minimum wages, but instead on Union tariffs that are mandatory for whole lines of work, even if ur part of a union or not.. These deals encompass pretty much every concievable type of work you can have, and is a result of focus on negotiation and concensus on matters of economy in scandinavia. The minimum wage laws are rarely if ever used anymore. Norway for example has no minimum wage set by law, even though you would earn about 120kroners an hour (a bit over 20 usd/hour) as a 17 year working at a MCdonalds (pretty much the worst paid jobs in norway, as american corporations are inspired by american wages (but usually also hit the wall with regards to getting hold of labour, so not alot of people over 22 work at a mcdonald's).

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  8. viagra online

    So, what is the deal if we've got a lot of money? I mean if we have the higher average income than European countries, what is the sin?

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  9. As has been mentioned earlier by other commenters:

    1. The countries mentioned work comparatively less than the US. The French (as per your main objection to a positive comparison) worked an average of 1,554 hours in 2009, while Americans worked 1,768 hours - a difference of 6.05 working weeks of time off for the French[1].

    If 2007 average hours worked and 2007 PPP adjusted median income numbers[2] are used for an rough (ignoring the possibility that the rich work a lot longer than the rest, or vice-versa) estimate of how much the French ($19,615) would make in comparison to Americans ($31,111) if they didn't take the time off, the French would be making ( $19,615 / 1,556) * 1,798 = ) $22,666 compared to our $31,111.

    2. It's also important to factor in health care expenditures in the US vs. other countries - for example France. The French spent about $3,696 in PPP adjusted dollars on health care per capita in 2008 compared to $7,538 for the US, a difference of $3,842 per capita[3].

    Carrying through this per capita difference with the average household size for the US (2.6)[4], we would end up with a difference in average health care spending per US household of (2.6 * $3,842 =) $9,989 more.

    Of course, adding these averages to median income numbers would be very questionable, because the upper outliers (wealthy) would be expected to have spent more on their healthcare and skew the averages up from the median, which is obviously a measure specifically used to exclude them. So I'll just list the measures separately:

    US:
    $31,111 in median PPP household income in 2007.
    1,798 average hours worked per worker in 2007.
    $19,598 on average dollars of total healthcare expenditure per 2.6 (average US household) persons in 2008.

    France:
    $19,615 in median PPP household income in 2007.
    1,556 average hours worked per worker in 2007.
    $9,989 on average dollars of total healthcare expenditure per 2.6 (average US household) persons in 2008.

    Comparison:
    US median households made $11,496 PPP dollars more than French households in 2007.

    US workers worked 6.05 (40 hour) weeks more than French workers in 2007, or about a month and a half, on average.

    US households spent, adjusted and averaged, $9,609 PPP dollars more on healthcare than French households in 2008.

    and as a coda[5]:

    Life Expectancy, France: 80.4,
    Life Expectancy, US: 78.3.

    Therefore, I'm not sure things are as clear cut as you would like them to be.

    [1] http://stats.oecd.org/Index.aspx?DatasetCode=ANHRS
    [2] http://www.oecd-ilibrary.org/social-issues-migration-health/society-at-a-glance-2011_soc_glance-2011-en
    [3] http://www.kff.org/insurance/snapshot/OECD042111.cfm
    [4] http://www.nationmaster.com/graph/peo_ave_siz_of_hou-people-average-size-of-households
    [5] http://www.un.org/esa/population/publications/wpp2006/WPP2006_Highlights_rev.pdf

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  10. This comment has been removed by the author.

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  11. @Jamaal Sibley

    1. It does not make any sense to augment French income by including income that French people would not, could not, and, certainly, *did not* earn. French unemployment has been, historically, very high by American standards, and is currently hovering near American levels since the crash [1]. French employers are also forced to provide 5 weeks paid vacation by law, while the US requires none. [2] Please note that this is PAID vacation. I hope it is clear that it's nonsensical to attempt to reconcile American work hours with those of France, as the fewer hours worked by the French are the consequence of their own government's policies and perhaps culturally-influenced individual decisions. I'm making no value judgments; this is just fact.

    2. The French may pay less as a nation for health care, but you cannot say that these per-capita expenditure values are applicable to households, as what matters is the out of pocket expense that a household pays. You are correct that American health care is expensive to the nation, but it is not quite so expensive to the American household itself, at $3,157 per year on average. [3]

    Since the figures posted in this blog are for "mid-2000's," and because both median household income and average health care expenditure per household have risen (albeit at not the same rate), it'd make more sense to use the 2008 figure in [3], which is $2,976.

    We still have around $6k to account for, and if you do the math, it's pretty clear that even the so-called "free" education in France is a bad deal for the median household. This median household has, if it even has children at all, 18 years to save for education, and the $6k difference is clearly more than enough. Of course, if the household has no children, then they are certainly much wealthier than their French counterparts. This also ignores the need-based aid that the US education system provides, both public and private.

    For comparison, the poverty line for an American family of four (two adults, two children) in 2010 was $22,314. [4]

    [1] http://www.indexmundi.com/france/unemployment_rate.html
    [2] http://en.wikipedia.org/wiki/List_of_statutory_minimum_employment_leave_by_country
    [3] http://www.bls.gov/news.release/cesan.nr0.htm
    [4] http://abcnews.go.com/Politics/us-poverty-rate-household-income/story?id=14508084

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  12. Very interesting blog.

    I just saw debate on the following thesis
    http://www.equalitytrust.org.uk/
    I find these arguments very thoughtful and they should not be dismissed as "leftist".

    Say what you want about American's making more money. That may be true. I see our society starting to devolve. Poverty, debt, environmental decay, pathetic schools, ballooning healthcare costs, and massive unemployment.

    I'm all for liberty and what I see Bill Gates doing "voluntarily" to make the world a better place. I get that.

    Something to consider is:
    Would you rather have 2 billion dollars and live in a gated community surrounded by poverty, or have 1 billion and everyone surrounding you be well off enough that crime is low and the rest of society is happy? I'd choose the latter.

    Also there is the diminishing marginal utility of money. Rich people don't need it that badly. Yes they invest it, but so what? I'm not interested in 5-7% bubble/burst fake growth. You can't raise a family looking for a new job every 6 years as you get older. Growth at 1-2% annually with no one in poverty is better than being 100% capitalist. Can't we have a system that encourages productive work, as well as helps those who are struggling?

    If you look at Denmark, by every measurable metric their lives are better off today than Americans. I know they didn't invent the iphone but greed is not what drove Steve Jobs. Americans are driven by creativity.

    Greed is a product of fear. And why do so many "Chicago" economists treat free markets as a kind of religion? I'm not a leftist, I just want my society to work. How much money is enough to make you happy and free?

    Look at Denmark today and tell me one reason why the American system is better? Have they found the balance between markets economics and social cohesion?

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  13. I get the arguement that all in France make less than the US, but I am an American living and working in France, and it is not at all as it seems. For example, I bought, own, and run my own company here in France and yet earn less than I would in the US. So the rule on working hours does not apply to me. In fact, it hurts my business with French employees hours and social charges that I uncur by having them. The thing is, you can have the option of earning more in the US if you choose to work more and harder. Yet if you work more and harder here in France, you are not earning more....so the ceiling here is set and cannot be broken. That is the price you pay in a socialist based market. Good for the workers, bad for the entrepeneurs..the argument that the life is more satisfactory is based upon a lifestyle that does not create more opportunities. My company provides new employment for 12 people, yet I am penalized by stopping my earning power with social charges and very restrictive employement terms.

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