01 June 2009

What is the relevance of the "average wage"?

Much of the discussion around MPs pay and expenses has made reference to the "average wage" in the UK. This got me thinking and I started to do some research, but immediately ran into a fog of adjusted numbers, put out in the main by the Institute of Fiscal Studies. The IFS's statistics, which were picked up by the BBC News website and were the basis for a number of graphs that have been repeated elsewhere, including by Guido Fawkes, such as this one:

Even on the IFS's own figures, the "typical weekly income" quoted here is the median figure of £393 per week, when perhaps the more relevant MEAN average figure of £487 should have been quoted (see: IFS report on poverty and inequality for these figures) - no doubt the BBC journalists were looking for the biggest spread. Furthermore, these numbers are adjusted for tax (including council tax) and number of dependent children, which makes them hard to link back to annual salaries.

Personally, I am better able to deal with annual gross amounts when talking about salary, because that's the basis of what I earn and what it says in my employment contract. Luckily, help is at hand from the Office of National Statistics, which gives these number in all sorts of formats.

For the record, the mean average annual gross salary in Great Britain in 2008 was £26,020.

However, if this is the basis of a meaningful comparison with MPs salaries, it is notable that the mean average annual gross salary for men in full time employment in 2008 was £35,122.

Of course, many men are at the start of their careers when they are earning less money, bringing down the average, so I looked up the breakdown by age and the highest earning group are men between 40 and 49 (which is probably the typical age of an MP and therefore perhaps a fairer comparison), and the average wage for this group was £40,786.

If we put him on the BBC graph, it looks like this:
So, against the figure of £40,786, an MP's salary of £65,000 or so no longer looks quite so excessive - it is certainly not a multiple of that figure.

But what sparked all this off, was considering that fiendishly complicated New Labour innovation: working family tax credits. These are means tested credits which taper off, but are still of value to a family whose combined income is less than £58,000 per year.

I thought that was an interesting figure to bear in mind, on the basis that the government makes the judgement on behalf of "ordinary people" with a family that if their combined earnings are less than £58,000 - only marginally less than an MP's earnings, they are entitled to state benefit.

I am not suggesting for one moment that this is an excuse for Scamalot or even an argument to pay MPs more, but I do think these figures could help inform that debate.

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