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What is Median Income?
Median income is the middle point of a distribution of incomes, where half of the population earns more and the other half earns less. It is a key economic indicator used to assess living standards, income distribution, and economic well-being.
Definition
Median income is the income level at which 50% of individuals or households earn above it and 50% earn below it.
Key Takeaways
- Represents the midpoint of income distribution.
- Less affected by extreme values than average (mean) income.
- Commonly used to assess household economic stability and inequality.
Understanding Median Income
Median income provides a more accurate picture of typical earnings than average income, especially in societies with significant income inequality. While mean income can be skewed upward by high earners, median income better reflects typical household or individual earnings.
Governments, economists, and policymakers track median income to evaluate economic progress, set tax policies, and measure poverty thresholds.
Median income is often reported by demographics such as age, gender, region, and household size.
Formula (If Applicable)
To calculate median income:
- Arrange all incomes in ascending order.
- Identify the middle value (or the average of the two middle values if the dataset size is even).
Real-World Example
If the annual incomes of five households are: P30,000, P45,000, P50,000, P100,000, P500,000, the median income is P50,000—not influenced by the very high outlier of P500,000.
Importance in Business or Economics
Median income is used to:
- Assess purchasing power
- Evaluate social welfare programs
- Understand economic inequality
- Guide policy decisions
- Measure standard of living
Types or Variations
- Individual Median Income
- Household Median Income
- Median Disposable Income
- Median Wage
Related Terms
- Mean Income
- Income Distribution
- Poverty Line
Sources and Further Reading
- World Bank – Income Data
- OECD – Income Distribution Statistics
- Investopedia – Median Income
Quick Reference
- Middle point of income distribution.
- More accurate than mean income in unequal economies.
- Key indicator of living standards.
Frequently Asked Questions (FAQs)
Why use median instead of average income?
Because median is not skewed by very high or very low incomes.
Does median income vary by region?
Yes, urban areas typically have higher median incomes than rural areas.
Is median income the same as median wage?
No, wages reflect earnings from work; income includes wages plus all other income sources.
