Average income is much less than we are being told

By Joe Montero

According to the government and reported by much of the media, the average adult in Australia has an income of $84,600. The so how does this match up with the reality that most seem to find themselves on the other side of this line?

It’s all in how it is calculated. To get the above figure, just add all incomes and then divide this by the number of people in the workforce full time. This is what the Australian Bureau of Statistics (ABS) is briefed to do.

A big problem with it is, that although this interpretation of average income may be able to be used by politicians to spruik what a good job they are doing,  it does not give an accurate picture of the income that most of us really do have.

It is highly skewed. A few are on fabulous amounts and nearly half of the real workforce is in part-time and casual work. The level of declared and hidden unemployment is at least 12 percent. One hell of a lot of people are left out of the picture.

According to calculations carried out by the new Daily, using ABS figures and using the median, the average is somewhere around $50,000. The median was used, because it is estimated by determining what the typical person in the middle earns, and not the total income divided by the number of people. This eliminates a large part of the skewing.

Look at it this way. As independent economist Saul Eslake put it: “If Bill Gates walks into a bar full of ordinary Australians, the mean income of the room has suddenly gone up a lot; but the median income hasn’t changed at all.” Using the ABS method in this case, would prove that everyone in the pub had suddenly become super rich.

An estimation from the Grattan Institute is that the medium income, which includes everyone, is $44,527 for 2017-2018. This is almost half of what we are being told.

ABS calculations do not include earnings from shares, rents and other sources, which do not all under the categories of wages and salaries. If these sources of income are included, the gap in earning between the top end and everyone else is much greater than we are led to believe. Including this part of the income reduces the median further. The is what Grattan Institute economist Danielle Wood has done and said to the New Daily. The method, she explained, was to look at what everyone had put in their income tax declaration.

A more accurate picture of what most actually take home in their pocket is important. It tells much more about how the economy is performing, who it’s performing for, and how the political leadership of Australia is performing. If we know these things, we are much better informed, and perhaps, even come to see that it can be different.