My biggest economic concern is that the United States, because of population aging and poorly designed entitlement programs, is slowly but surely going to become a European-style welfare state.
To help convince people that this is a bad outcome, I frequently share data showing how ordinary people in the United States have higher living standards than their European counterparts.
And I also like to share data showing that lower-income Americans often are better off than average-income Europeans.
Sounds convincing, right?
Well, I recently wound up in a discussion with a left-leaning fellow who claimed my data must be misleading because of the difference between “mean” and “median.”
For those not familiar with these terms, the “mean” is the overall average of a group and the “median” is the midpoint. Here are two examples that show the differences.
- If you have five people making $80,000, $90,000, $100,000, $110,000, and $120,000, the “mean” income is $100,000 and the “median” income is also $100,00.
- If you five people making $10,000, $20,000, $30,000, $40,000, and $300,000, the “mean” income is still $100,000 but the “median” income is only $30,000.
As you might suspect, folks on the left think the United States is like the second example – i.e., a very unequal society. They seem to think that America has high levels of “mean” income mostly because of a few really rich people.
So it was fortuitous that I saw a tweet this morning that addresses this issue. Here’s a look at “median” household income in OECD nations.
Lo and behold, the midpoint household in the United States is richer than almost every household in the western world.
Only the tiny tax haven of Luxembourg ranks higher than the United States. And oil-rich Norwegians are the only others who are close.
The bottom line is that Americans are richer than Europeans, no matter how the data is sliced. And the U.S. advantage almost surely is the result of having more economic freedom and smaller government.
But if we no longer have better policy in the United States, there’s no reason to think that Americans will continue to be more prosperous.
P.S. Based on data from some Nordic nations, I’m guessing Norwegian-Americans and Luxembourg-Americans are far richer than their cousins back in Europe.
Courtesy of International Liberty ("A Prosperity Contest Between the U.S. and Europe")