How does your salary stack up against everyone else? It’s a common question people wonder.
Many people don’t have a clear idea about what the typical Australian income is. Part of the issue is defining what ‘typical’ actually is. There’s ‘average’, but what does that even mean? As you’ll see in this post, there are many ways to view what the typical Australian income is.
Average Income – $78,823
If you have a look at the Australian Bureau of Statistics (ABS) website, you’ll see that as of May 2016, the average full time adult ordinary time weekly earnings were $1,516. You can also see that this figure is clearly defined by exactly what data is represented:
- Average (or mean) – a representation of a ‘typical’ number in a data set, calculated by taking the total of all values and dividing by the number of values.
- Full time – this figure only includes people that work full time and excludes all part time or casual employees. For people that also only work full time, it makes sense to only compare against other full time employees.
- Adult – doesn’t include the many employees who are not yet adults (i.e. young part time employees).
- Ordinary time – only takes into account standard earnings, ignoring overtime and other sources.
So if we modify or add to any of the above, we will end up with a different number. That’s why it’s important to know how a number was obtained, because you might not be comparing on the same basis (this goes for anything, not only incomes).
Let’s expand to include all types of earnings (i.e. not only ordinary time). The average income now becomes $81,921.
These figures are for full time workers only. If the range of data is widened to include part time workers as well, the average annual salary falls to $60,330. The significant drop indicates that there are a large number of part time employees that make up the total workforce.
The ABS also provides this data split for males and females, which shows some interesting results. The average full time adult male ordinary time earnings are $83,907, while the average full time female ordinary time earnings are $70,330.
Again, if we bring all workers into the mix (i.e. part-timers as well), the average annual salaries fall to $72,462 for males and $48,105 for females.
As you can see, the figures for ‘average income’ vary dramatically depending on what data we look at.
Median Income – $70,720
The issue with average income is that a very small number of people with extremely high salaries can skew the results higher than what would be considered typical.
One way to reduce this bias is to use the median – essentially all data points (i.e. people’s salaries) are lined up in order from lowest to highest, and the midpoint of the number of samples is taken. This removes any bias that a small number of high-income earners have on the result, and can provide a more representative indication of the typical salary.
However, as with the average, there are a number of different criteria that can be used to view the data.
While the median income for all full time adult employees is $70,720, if all employees are considered this figure becomes $52,052.
The following table shows the median income percentiles, as per ABS data from May 2014.
|Percentile||Full Time Employees Paid at the Adult Rate||All Employees|
All of the incomes we’ve discussed so far are for individuals. This doesn’t give a completely clear idea of how we fair against the rest of Australians, because most people will live in a household with others and combine resources to some extent. For example, the standard of living for people earning $150,000 per year is different if one person lives alone, and the other is supporting a spouse and two kids.
Firstly, let’s look at gross household income, unadjusted for household size. The median gross household income as of 2013-2014 (the most recent data available from the ABS) was $80,496.
Now if we take into account household size, the picture changes dramatically. The table below is a summary of equivalised income data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, updated to September 2014 using National Accounts data.
Equivalised income allows for comparisons between different households by applying a modified OECD (Organisation for Economic Co-operation and Development) scale that adjusts for the fact that larger households require higher incomes than smaller households to maintain the same standard of living.
For the following household income amounts you will see the percentile (i.e. the percentage of people with a lower household income) for various circumstances.
Note that household income in this instance is defined as wages, benefits, pensions, allowances, interest, dividends, business income, and superannuation earnings – all before tax (gross).
|Household Annual Income||Single Adult||Two Adults, no Children||One Adult, One Child||Two Adults, One Child||Two, Adults, Two Children|
As you can see, a household income of $120,000 per year is ‘very good’ if you’re on your own, and only ‘average’ if you have a spouse and two kids to support.