Naked Statistics: Stripping the Dread from the Data

by Charles Wheelan

Per capita income is a simple average: total income divided by the size of the population. By that measure, average income in the United States climbed from $7,787 in 1980 to $26,487 in 2010 (the latest year for which the government has data).1 Voilà! Congratulations to us. There is just one problem. My quick calculation is technically correct and yet totally wrong in terms of the question I set out to answer. To begin with, the figures above are not adjusted for inflation. (A per capita income of $7,787 in 1980 is equal to about $19,600 when converted to 2010 dollars.) That’s a relatively quick fix. The bigger problem is that the average income in America is not equal to the income of the average American. Let’s unpack that clever little phrase. Per capita income merely takes all of the income earned in the country and divides by the number of people, which tells us absolutely nothing about who is earning how much of that income—in 1980 or in 2010.