# Is the average wage a reliable measure for how much the average person earns?

This web site (http://www.livingin-australia.com/salaries-australia/) claims that the average australian wage is 68k per year. I've had a look at some other resources too and they all seem to use this figure.

I'm from Australia - and 68K Australian which is about 72K USD at the moment. That just sounds incredibly high for me. From purely personal experience, I would say someone that earns 68K would be doing pretty well and I would say that I live in a capital city that does better than most.

So is the average wage a reliable measure at all? And if it is reliable, how does it mean if it's high or if it's low?

How is it calculated? Does it take into account like every tax return or every person within the workforce? What about part time workers, the unemployed or millionaires?

Are there better measures that would give a much better indicator?

Your question is intriguing as statistics are a funny thing. There's average which is just that, total all income and divide by population. Then there's median, which is where 50% are higher, 50% lower. I'm ignorant of Australia, forgive me, if there is a large concentration of wealth, the average becomes less and less meaningful as a measure of the general welfare of the population. Simple example, one in 100 people earn \$1M. That means the other 99 make \$10K less to get to the same average, right?

So to educate myself I took a glance at List of countries by income equality. In fact, your GINI coefficient is more favorable, as is your R/P 10%.

I don't know if this was tangential to your question, but it was a lesson for me, thanks.

The average alone means nothing at all. You need to know the standard deviation for the average to mean anything.

This allows you to know how much the majority of people earn and to help the outliers from pulling the average up or down.

• The shape of the curve isn't a normal distribution, I wonder how much value standard deviation would add vs a good chart by deciles (i.e. The figure for ten percentiles). Commented May 25, 2011 at 2:04
• Standard deviation is a mathematical concept that's not restricted to normal distributions. It also applies to e.g. Poisson distributions. However, the conventional measure for income inequality is the GINI coefficient. Commented Jun 3, 2011 at 11:32

is the average wage a reliable measure at all?

It all depends on what you are looking for. Average wage stats when used by themselves just don't mean much. If you're trying to get an idea of how well one Aussie does against the norm of all working Aussies - a largely unsubtle but compelling stat - then average wage probably works as a blunt force instrument.

But to get more than this requires other measures. For example, to compare your AUD 68K Aussie against a GBP 45K Brit, then a host of other stats would come into play - but again, the purpose of the comparison will identify the stats used.

Regarding how the average wage stats get generated, see this ABS page which describes how they get the figures. In brief:

--they include workers 15 years of age and older

--they ignore full time/part time

--they consider gross income including allowances

--they ignore overtime

--they ignore workers in unincorporated businesses

Salary alone is meaningless. My friend lives 150 miles away in NYC and makes double my income. But his 2 bedroom apartment costs 3x more than my larger home, he cannot afford a car, and we have similar disposable income.

On paper, he's doing better. In terms of standard of living, we're about the same.