Factors affecting earnings
Date posted: January 23, 2014
When it comes to comparisons of salaries earned by households at different rungs on the economic ladder, what do we need to keep in mind? N.C. State University economist Mike Walden responds.
“What we’ve heard recently is that households who are on that higher those higher rungs have seen their salaries go up faster than households on the lower rungs, and that is creating income inequality. But what I want to point out on today’s program, though, is that you always have to worry when you make these comparisons (is whether) you are comparing apples and apples or apples and oranges.
“And when we really delve into the data on households and what they earn, we see that there’s actually a lot of difference between higher-income households and lower-income households. For example, if you look at the highest 20 percent of households in terms of earnings, four times more of those households have two earners in their household versus those in the lower 20 percent of earnings.
“Also four times more of the higher-income households are likely to be married couples compared, again, to lower-earning households. Four times more of the top 20 percent of earners are working full-time — again, compared the lower 20 percent of earners. And five times more of the top 20 percent of earners have a college degree, compared again to the lower 20 percent.
“So we have to make sure that when we’re making these comparisons we’re controlling, if you will, for all the various factors that can affect what a household earns.”
Category: Economic Perspective