Saturday, June 28, 2008

Chasing the relative decline in Mercer Island incomes

One of the many ways people get frustrated with me is that I have a very skeptical view of statistics. Numbers are so easy to manipulate -- and so regularly wrong -- that I rarely see a so-called "fact" without finding a hole or two in it.

Here's my latest example, but first, I apologize for the misleading headline. I believe it is a statistical fact that Mercer Island household incomes are falling relative to the per-capita incomes of the rest of the United States. Unfortunately I'm unable right now to get specific Mercer Island historical information (at least, not on-line) so my claim is a little weak right now. But hear me out.

Anyone who reads the newspaper (or political web sites) knows that incomes in America are stagnant, and have been for a while. But just because it's in the paper, is it true?

I looked up the statistics myself on the Census bureau website. Here are the latest numbers available:

  Median household income
2006 $ 116,011
1995 $ 98,990

Sure enough: that's about 17% wage increase in 10 years -- less than inflation--and pretty pathetic. [insert newspaper man-on-the-street interview with somebody struggling to make ends meet. Extra credit: insert contrasting story about rich guy who made a windfall on oil profits]

Now let's look at per-capita income:

  Median per-capita income
2006 $ 26,352
1995 $ 17,227

That's a whopping 53% improvement during the same 10 year period.

How can both facts be true at the same time? The answer is that household sizes are changing. People who tell you that American incomes are stagnant are making the classic error of comparing apples to oranges; a "household" in 1995 is not the same as a "household" in 2006.  In fact, you would expect household incomes to rise more slowly relative to per-capita income because the more incomes rise, the more likely people are to want their own living space (think about 20-somethings who can't wait to get a job so they can move into their own place).

So how does this relate to Mercer Island? Well, we are one of the few areas in the country where (thanks to the limited amount of developable land available) the number of households hasn't changed much in 50 years. In fact, 68% of us live the Ozzie & Harriet way, with a mom+dad and kids all living in the same house, often with Mom earning no income. So I bet if you look at the ratio between Mercer Island household income and U.S. per-capita income in 1960, you'd find the gap has almost certainly dropped compared to today. Our households are becoming poorer relative to the rest of the U.S.!

The statistics above show how this would work nationally: in 1995, the ratio between household income and per-capita income was 5.75, but by 2006 it had dropped to 4.4, no doubt because all those rising incomes make people naturally want to move out of shared living quarters into their own private places.

How about it?  can somebody get me a previous year for the following statistics:

Mercer Island HH income # HH # indivs Per-capita income (MI) Per Capita income (US) Radio between MI-HH and US Per capita
1999  110,830 8,437 22,036 57,799 27,939 3.96
1989 ? or before ? ? ? ?   <I bet you this ratio is higher>

If I can find another earlier dataset, I'm sure it would prove my case.  Then, like anyone who finds a statistical fact that supports a preconceived idea, I think I'll try to find a politician who can do something to fix this inequity.  What can we do to prevent Mercer Island household incomes from plunging any further?  Don't laugh -- the statistics don't lie.  :-)-

2 comments:

Jack said...

Not true. There are far more rich people on Mercer Island today than in the past. The gap between rich and poor is widening, not shrinking.

Anonymous said...

I can't recall where I read this, but it was within the past year...that the population of Mercer Island is aging significantly. I think this was related to schools, that there were now proportionately more homes without school-age children (some of this was due to the condo growth downtown)...and I think an increasing number of "seniors". How you measure the income of semi-retired seniors and factor that into the mix, I have no idea.