Why did we choose median earnings instead of the higher mean earnings for the American HD Index?
The median was chosen for two reasons. First, it is much less sensitive to extreme values than the mean, and thus it provides a better estimate of what a “typical” person earns. Consider a hypothetical distribution where nine people earn $10,000 and one person earns $1,000,000. The mean is $109,000 – more than 10x too high for 90 percent of the group and almost 10x too low for the millionaire. The median is $10,000. This is a better representation of what the “typical” person in this group earns. Second, median earnings is the only income indicator provided by the ACS for all the groupings used in the American HD Index (region, state, congressional district, gender, race/ethnicity, and race/ethnicity by gender).
