Median vs Average Income

Median and average (mean) income provide different perspectives on earnings data, with medians offering a more representative view of typical incomes by resisting skew from high outliers, while averages capture total earnings potential but are easily distorted by the wealthy few.

What Is the Meaning of Median vs. Average Income?

While

median incomes

more accurately portray

typical earnings

,

average incomes

offer insights into overall earnings levels across a population. Benchmarking your income against peers using both figures gives useful perspective on your financial condition. Medians reflect middle-of-the-road incomes, while averages capture collective earnings, helping savers and investors make informed decisions.

In statistics, both are measures of

central tendency

, using a single value to describe a dataset. Averages sum all values and divide by the count, making them sensitive to extremes. Medians sort values and pick the middle one, ignoring outliers.

For income, this distinction is crucial because wealth concentration pulls averages upward. In the U.S., means exceed medians due to top earners’ influence, signaling inequality.

Average Net Income vs. Median Net Income

Averages measure collective incomes but skew higher from high outliers. Medians arrange incomes low-to-high and select the middle value, where equal numbers fall above and below, eliminating extreme influences. Median figures are typically lower than averages.

Consider incomes: $30,000, $50,000, $60,000, $70,000, $100,000. Average: ($30k + $50k + $60k + $70k + $100k)/5 = $62,000. This exceeds four individuals due to the $100k outlier. Median: sorted list’s middle ($60k), better reflecting most earners.

When averages far exceed medians, it indicates income concentration among high earners, suggesting uneven financial wellbeing.

Metric	Description	Sensitivity to Outliers	Best Use
Average (Mean)	Total income divided by count	High	Overall economic output
Median	Middle value in sorted list	Low	Typical earnings

This table highlights why medians suit ‘typical’ analysis.

How to Calculate Median Net Income

To find median: sort incomes ascending, identify the middle. Odd count: exact middle. Even: average of two middles.

Example (odd): $30k, $50k, $60k, $70k, $100k → sorted same → median $60k.

Example (even): $30k, $50k, $60k, $70k → middles $50k+$60k=average $55k.

Medians provide accurate middle-class reflections for benchmarking.

How to Calculate Average Net Income

Average: sum incomes, divide by count. Simple but outlier-sensitive.

Example: above five → $310k / 5 = $62k. Easy, yet skewed.

• Collect all incomes.
• Sum them.
• Divide by number of incomes.

Averages suit equal-distribution hypotheticals.

When to Use Median vs. Average Net Income

Use medians when outliers skew data, like incomes. Averages suffice if similar. Rising average but flat median signals top-heavy gains.

Averages show total wealth; medians show ‘middle’ reality. Use both for full picture.

In Australia (May 2025), full-time average: $2,010/week ($104,520/year); median: $1,741/week ($90,532/year)—$13,988 gap shows skew.

Industry	Average Weekly	Median Weekly	Difference
Mining	$3,174	$2,832	$342
Financial Services	$2,323	$2,163	$160
Education	$2,098	$1,903	$195
Health Care	$1,978	$1,689	$289
Construction	$1,957	$1,600	$357
Retail	$1,504	$1,300	$204

Mining’s gap exemplifies high-earner pull.

US Median and Average Income Statistics

US data shows consistent mean > median. SSA notes median as middle wage; half earn below. FRED highlights family income gaps.

• UK (2023-24): Mean pulled up by high earners; median midpoint.
• Global: Means exceed medians due to top 1%.

These reveal inequality: median shows ‘middle’ struggles despite high averages.

How to Use Median or Average Net Income in Financial Planning

Compare earnings to local medians/averages for standing. Median $50k, your $55k: above middle. Average $70k suggests few boost it—realistic view via median.

Guides budgeting, saving, investing. Flat median amid rising average? Seek advancement. Advisors use for tailored plans.

• Benchmark salary negotiations.
• Assess affordability (housing).
• Track career progress vs. peers.
• Plan retirement relative to norms.

Median vs Average Income by State

State data varies; medians better reflect living costs. High-average states like CA skew from tech; medians show typical. Use Census for precise.

State Example	Median HH Income	Average HH Income
National (est.)	~ $75,000	~ $90,000+
High-cost (e.g., NY)	~ $80,000	~ $110,000

Gaps widest in unequal areas.

Why Median Income Is Often More Useful Than Average

High earners skew averages; medians resist, showing true ‘typical’. For policy, planning, medians gauge broad wellbeing.

Robin Hood example: Averages assume equality; medians show middle reality.

Frequently Asked Questions (FAQs)

Q: Why is average income higher than median?

A: High earners (outliers) pull the average up, while median ignores them, focusing on the middle.

Q: When should I use median income over average?

A: Always for ‘typical’ earnings, especially skewed data like income.

Q: How do you calculate median for even numbers?

A: Average the two middle values after sorting.

Q: Does median income include all households?

A: Yes, sorted middle across all.

Q: Can average ever be lower than median?

A: Rare, but possible with low-end outliers (e.g., negatives).

Q: Why use both metrics?

A: Average for total; median for typical—complements for full insight.