Household Income Has Fallen. People's Income May Not Have

This chart appeared in an article in the Wall Street Journal today. What it shows is actually true. The implications that the WSJ writer derives from it are not. Those not statistically literate (which is to say 95% of the population and 99% of journalists) would look at this chart and conclude that people are earning less now than in 2000.



A statistician would look at this and ask the question, "I wonder if the composition of households has changed since 2000?" It has.




The number of people per household who are actually earning an income has dropped quite a bit since 2000. Here's a simple example. Suppose you live in a neighborhood of 20 households. The median income per household is $70,000. The husband and wife in one household separate. Now there are 21 households in that neighborhood that, collectively, are earning exactly the same amount of money as they were before. The median income of that neighborhood has dropped, although nothing else as changed,.

It's important (even for journalists) that in examining data that you at least ask the question, "what else might be going on here?" before you leap to a conclusion.