Companies and government organizations collect data on income earned by workers to analyze industries and help workers make informed career decisions. Median salary is a common statistic used by organizations such as the Bureau of Labor Statistics and the Social Security Administration as an estimate of the amount of money earned by a typical worker. Understanding median salary and how it differs from average salary is essential to get the most out of income statistics.
In statistics, the median is the data value at the exact middle of a set of data when the data is arranged in ascending order. For example, if a set of data that consists of: 1, 1, 2, 3, 4, 5 and 9, the median is 3 because it lies in the midpoint of the data set. When a data set has an even number of values, the average of the two values in the middle is usually used as the median. Median salary is simply the median of a set of salary data. Roughly half of all individuals in a data set earn more than the median and half make less.
Median vs. Mean
Median is often confused with another statistic called the mean, or average. The mean of a data set is equal to the sum of all the data values divided by the total number of values in the data set. Consider a data set consisting of the following numbers: 1, 8, 9, 10 and 12. The sum of the numbers is 40 and there are 5 numbers in total, so the mean is 40 divided by 5, which equals 8. In this case, the median of the data set equals 9. The median and the mean can be the same value, but they are often different. In salary data, median salaries for occupations are often lower than average salaries, because highly successful individuals can pull up the average, but they have little effect on the median.
The main advantage of median salary data is that it gives little weight to individuals at the extremes of the income scale. As a result, median salary can be a better measure than the mean for approximating the amount that a typical worker might earn in a certain occupation. For example, if there are 49 singers in the economy that make $30,000 a year and one superstar singer that makes $10 million a year, the average income of all singers in the economy is $229,400. In this case, the median income of $30,000 is likely a much better estimate of the amount of income a new singer could expect to earn.
Salary quartiles are another common income statistic released by government organizations like the Bureau of Labor Statistics. Data sets have two quartiles: the lower quartile is the value at the middle of the data values below the median and the upper quartile is the value at the middle of the data values above the median. For example, for the data: 1, 2, 3, 4, 5, 6 and 8, the lower quartile is 2 and the upper quartile is 6. When considering salary data, half of all workers in a data set earn salaries between the lower and upper quartiles.
- The Free Dictionary: Median
- Murdoch University: Why Use the Median and not the Mean?
- Social Security Administration: Measures of Central Tendency for Wage Data
- U.S. Bureau of Labor Statistics: May 2011 National Occupational Employment and Wage Estimates United States
- U.S. Bureau of Labor Statistics: Economic News Release 2012 -- Table 5
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