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Misleading: Average American Family Income Declines

Martin Crutsinger, the AP Economics Writer, has written an article that claims the average income of the American family has declined.

Oh, really?

The Federal Reserve reported Thursday that the drop in inflation-adjusted incomes left the average family income at $70,700 in 2004. The median, or point where half the families earned more and half less, did rise slightly in 2004 after adjusting for inflation to $43,200, up 1.6 percent from the 2001 level.
The median, or midpoint for net worth rose by 1.5 percent to $93,100 from 2001 to 2004. That growth was far below the 10.3 percent gain in median net worth from 1998 to 2001, a period when the stock market reached record highs before starting to decline in early 2000.

So it's true that the average family income has not kept up with inflation. It's not that people are being paid less... just that their money isn't worth what it was a few years ago.

But, the median value (which is a much better indicator) did not decrease. Why is the median value better? It eliminates the outliers that can make an average skewed. That average income includes your family, but it also includes Bill Gates' family.

But even if we do focus on the average income, let's remember that the period of 2001-2004 is one that includes a mild recession.

So wouldn't a better headline, and a more accurate one, be something like: "Despite recession, median income rose since 2001?"

Instead it just seems like the AP and/or Mr. Crutsinger (who is to blame is your guess) are trying to spin this report as bad news for the economy.

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