David Brooks resurrects the claim that
The Western European standard of living is about a third lower than the American standard of living, and it’s sliding. European output per capita is less than that of 46 of the 50 American states and about on par with Arkansas.This was done to death in the blogosphere a couple of years ago, but it’s obviously time for another go.
Update: Oops! Scott Martens points out in comments that the EIU gives US median household income as $57 936, way out of line with the Census Bureau figure, which obviously invalidates my comparison, and casts doubt on their figures for France. I guess I’d better not just rely on a quick Google next time. I’ll look into the EIU numbers some more.
And, as several commentators point out, that will also teach me to be more careful before slagging off others for sloppy work. Time for a dish of crow.
Further update I haven’t yet found out how the EIU gets its numbers, but I’ve fixed the obvious errors in the post and taken the opportunity to remove unfair comments about Brooks
The obvious problem with Brooks’ claim, as it refers to standards of living, is the use of arithmetic means rather than medians. The incomes accruing to Bill Gates and the rest of the Forbes 400 rich list make a measurable difference to the US average, but have no effect on US living standards (apart from the 400 and their immediate families constituting perhaps 0.001 per cent of the US population). The top quintile of households gets somewhere between 40 and 60 per cent of aggregate income and therefore dominate calculations of mean income, but most people are not members of the top quintile.
A much more relevant statistic is median household income. Rather than do proper research on the topic, I relied on a quick Google, unwisely as it turned out.
The US Census Bureau has excellent data on median household income by state and for the US as a whole. It produces the striking result that real median household income was lower in 2004 (43,318) than in 1998 (43,825) and has increased only marginally since 1991 (41,411). Admittedly, average household size has been declining slowly over time, but this is still a striking corrective to Brooks-style triumphalism.
For an international comparison , I found that the Economist Intelligence Unit publishes data and projections for median household income. I couldn’t locate data for a suitable EU aggregate so I picked the obvious example, France (I checked a couple of other EU countries and they were similar). The EIU reports that French median household income for 2004 was $US42,451. Unfortunately, the EIU obviously uses a different estimator than the US Census Bureau as it reports median US household income as 57 936. This puts French median household income at 73 per cent of the US level.
On the same data set, however, average household size in the US is 2.7 persons, compared to 2.4 in France, so income per person in the median French household is about 80 per cent of the US level. Similar comparisons apply to other Western European countries (thanks to commenter ‘ab’ for pointing this out).
It’s also necessary to take account of work and leisure; Americans have more of the former and French more of the latter, and both appear to be happy with their choices. This factor accounts for most of the difference in income between the US and western EU countries.
In addition, there are lots of intangibles which are a matter of taste. Readers can make their own choices between Paris, France and Paris, Arkansas in these respects.
fn1. The income accruing to this group bounces about, but it appears to average around $50 billion a year (a 5 per cent return on wealth of 1 trillion) contributing about 0.5 per cent to US mean income.
fn2. In the original version of the post, I incorrectly compared this figure to the Census Bureau number. I suspected this might be an exchange rate adjusted number rather than the more correct PPP, but I now think it’s probably PPP.