Average V Median wage Ireland?

ELM327

stefanovich wrote: »

Do rich people just leave Ireland?

You'll find a lot of self employed people happen to earn just under 100k.
A lot of similar measures out there. If you're a PAYE employee you won't reach millionaire status most of the time too.

stefanovich

stefanovich wrote: »

I've said this before but I'll say it again.

The government wants us all working, kids in a creche getting inferior care and food.

It should pay to have a single income family. The tax credits should be 100% transferable for a start and rate bands should also be shared completely.

That would provide a couple with one working a standard rate cut off of €70,600 as opposed to €44,300 ........... folk would be p1ssing and moaning about one of them being practically forced to become a stay at home parent losing their independence and ending their careers etc etc etc.

ELM327 wrote: »

You'll find a lot of self employed people happen to earn just under 100k.
A lot of similar measures out there. If you're a PAYE employee you won't reach millionaire status most of the time too.

Most who are well informed will lash decent amounts into executive pensions so they'll end up with the €2m pension pot or close to it.
10 to 15 years ago lots of self employed folk earned just to the standard rate cut off and claimed expenses that were unvouched. Things have thankfully moved on and now most pay much more PAYE etc.

Eric Cartman

ELM327 wrote: »

You'll find a lot of self employed people happen to earn just under 100k.
A lot of similar measures out there. If you're a PAYE employee you won't reach millionaire status most of the time too.

You see a funny trend all the time, high earning PAYE workers might buy an expensive new build house and mortgage the lot, but when you find a house that wouldn't usually be worth a lot but theres nice cars in the driveway , its extended out the arse and the interior is fit for a palace thats somebody self employed.

theres a huge gap between the spending power and reported earnings of self employed people in Ireland because the tax regime is so punitive yet full of holes.

stefanovich

ELM327 wrote: »

You'll find a lot of self employed people happen to earn just under 100k.
A lot of similar measures out there. If you're a PAYE employee you won't reach millionaire status most of the time too.

A lot of self employed people avoid tax by underreporting earnings.

stefanovich

stefanovich wrote: »

A lot of self employed people avoid tax by underreporting earnings.

As in self employed plumbers, mechanics, builder etc doing cash jobs?

Eric Cartman

Augeo wrote: »

As in self employed plumbers, mechanics, builder etc doing cash jobs?

its not even cash jobs.

mobile phone, diesel, vehicle maintenance, broadband for the house, subsistence allowance, buying a laptop, buying tools etc... all come out before tax , where a PAYE person would come out after. You could have 10-15k a year come out before tax legally and fairly handy.

then theres barter jobs
you're a plumber , you plumb your kitchen and bathroom , you have a mate who's a tiler, he tiles your kitchen and bathroom, you plumb his kitchen and bathroom, no money changes hands and you both got something.

KaneToad

Eric Cartman wrote: »

yes, once you make over a million a year theres little reason to remain tax resident here,

Which is why O'Leary should be admired. He's happy to criticise Ireland and give his opinions but he puts his money where his mouth is and pays his taxes here. Unlike other phonies who benefitted greatly from the Irish state and decide to be exiles. Yet do secret charity work (that they let everyone know about) to drop some crumbs to the plebs. A certain Limerick man comes to mind...

stefanovich

stefanovich wrote: »

A lot of self employed people avoid tax by underreporting earnings.

Eric Cartman wrote: »

its not even cash jobs.

mobile phone, diesel, vehicle maintenance, broadband for the house, subsistence allowance, buying a laptop, buying tools etc... all come out before tax , where a PAYE person would come out after. You could have 10-15k a year come out before tax legally and fairly handy.

.................

Nothing untoward in most of that IMO, I'd not class that as under reporting earnings.

Eric Cartman

KaneToad wrote: »

Which is why O'Leary should be admired. He's happy to criticise Ireland and give his opinions but he puts his money where his mouth is and pays his taxes here. Unlike other phonies who benefitted greatly from the Irish state and decide to be exiles. Yet do secret charity work (that they let everyone know about) to drop some crumbs to the plebs. A certain Limerick man comes to mind...

I wouldn't call them phonies etc..

tbh the fact that every single one of them except Oleary does it suggests more is wrong with our tax system than that every wealthy person is somehow bad.

all the big accounting firms release tax guides for foreign investors and domestic clients here every single year and universally they all say 'put your earned income somewhere else bar your own pocket because of how bad the taxes are'

Geuze

KaneToad wrote: »

Which is why O'Leary should be admired. He's happy to criticise Ireland and give his opinions but he puts his money where his mouth is and pays his taxes here. Unlike other phonies who benefitted greatly from the Irish state and decide to be exiles. Yet do secret charity work (that they let everyone know about) to drop some crumbs to the plebs. A certain Limerick man comes to mind...

Indeed.

I heard that MO'L trains the under 10s in rugby??!! Is that true?

There is something unpatriotic about moving abroad to avoid taxes.

Eric Cartman

Augeo wrote: »

Nothing untoward in most of that IMO, I'd not class that as under reporting earnings.

its all legit and any accountant worth his salt will tell you to do such. Most self employed tradespeople / professionals would all have a declared income somewhere shy of 75k if their wife doesn't work or 50k if she does , but the spending power of a PAYE worker on 100-120k.

Eric Cartman

Eric Cartman wrote: »

its not even cash jobs.

mobile phone, diesel, vehicle maintenance, broadband for the house, subsistence allowance, buying a laptop, buying tools etc... all come out before tax , where a PAYE person would come out after. You could have 10-15k a year come out before tax legally and fairly handy.

then theres barter jobs
you're a plumber , you plumb your kitchen and bathroom , you have a mate who's a tiler, he tiles your kitchen and bathroom, you plumb his kitchen and bathroom, no money changes hands and you both got something.

I'm splitting hairs but hard to think of a lot of this as 'avoidance' of tax imo. Tools are essential to a tradesman obviously, so is a vehicle etc. If the govt offer a subsistence allowance you'd be mad not to take it. Having said that I'm sure some take the piss. I've paid cash for various jobs before, whether it gets declared or not, who knows?

Eric Cartman

Eric Cartman wrote: »

its all legit and any accountant worth his salt will tell you to do such. Most self employed tradespeople / professionals would all have a declared income ...... 50k if she does , but the spending power of a PAYE worker on 100-120k.

Bit of a jump there.
Take the self employed professional paying himself €50k as his wife is working. What "turnover" isn't he paying himself so that he has the spending power of a PAYE worker on 100-120k?

Unless there's a company EV in there or some BIK dodge on a 4 seater SUV/4WD I'm not seeing that much opportunity for the claimed spending power tbh...... throw €30k into a pension doesn't do anything for spending power today either so I doubt you are thinking of pensions.

stefanovich

Augeo wrote: »

Bit of a jump there.
Take the self employed professional paying himself €50k as his wife is working. What "turnover" isn't he paying himself so that he has the spending power of a PAYE worker on 100-120k?

Well if you make 70K and report 38K? A self employed person reporting an income just at the rate band should be treated with suspicion.

stefanovich

stefanovich wrote: »

Well if you make 70K and report 38K? A self employed person reporting an income just at the rate band should be treated with suspicion.

Is that the done thing nowadays?

stefanovich wrote: »

A lot of self employed people avoid tax by underreporting earnings.

You seem to be in the know.

Eric Cartman

Augeo wrote: »

Bit of a jump there.
Take the self employed professional paying himself €50k as his wife is working. What "turnover" isn't he paying himself so that he has the spending power of a PAYE worker on 100-120k?

Unless there's a company EV in there or some BIK dodge on a 4 seater SUV/4WD I'm not seeing that much opportunity for the claimed spending power tbh...... throw €30k into a pension doesn't do anything for spending power today either so I doubt you are thinking of pensions.

so lets say you've a paye worker on 100k and they want to buy a new laptop, it costs 2000 inc vat, that PAYE worker has to earn about 3800 euro to get out 2000 in money to spend on that laptop.

self employed lad wants a laptop , that 2000 becomes 1626 + vat , thats taken out of pre tax profit and every year 12.5% of that is deducted again from profits for depreciation. in the end it costs the self employed person half what it costs the paye worker. So a gross self employed income of 50k can in many ways resemble a PAYE income of 100k.

Eric Cartman

correct horse battery staple wrote: »

I think anyone who thinks self employed are treated preferentially by tax system should go and start their own business then comeback and report a few years later.

I am winding down my own company of ~14 years (its rediculous how hard that is actually to do!) this year, moved onto working full time for a MNC few years back, less stress, more stable outlook in life, a "gasp" pension, and no headaches of dealing with accountants and revenue.

Revenue just treat small business as guilty until proven innocent, last time they tried latching onto me, they ended up owning me money. But it still resulted in needless stress to me.

If I ever come up with another good business idea, Ireland would not be my choice to start a company again.

its a damn hard life, some perks but the tax is still insane and its hard.

Eric Cartman

Eric Cartman wrote: »

so lets say you've a paye worker on 100k and they want to buy a new laptop, it costs 2000 inc vat, that PAYE worker has to earn about 3800 euro to get out 2000 in money to spend on that laptop.

self employed lad wants a laptop , that 2000 becomes 1626 + vat , thats taken out of pre tax profit and every year 12.5% of that is deducted again from profits for depreciation. in the end it costs the self employed person half what it costs the paye worker. So a gross self employed income of 50k can in many ways resemble a PAYE income of 100k.

I understand the financial side of things but I'm struggling to see how the self employed professional paying himself €50k as his wife is working has the spending power of a PAYE worker on 100-120k.

There's only so many laptops one can buy.

As I said unless there's a company EV in there or some BIK dodge on a 4 seater SUV/4WD I'm not seeing that much opportunity for the claimed spending power tbh...... throw €30k into a pension doesn't do anything for spending power today either so I doubt you are thinking of pensions.

You are saying this yourself

Eric Cartman wrote: »

its a damn hard life, some perks but the tax is still insane and its hard.

Laura2021

That's if they care about putting money into a pension and not something else.
Seems the people who work in Government jobs only care about pensions which you wont get until 68 years of age and probably go up again what's the chances of dieing before you get to enjoy it.
How much money will you actually need when your 70

PeadarCo

Eric Cartman wrote: »

so lets say you've a paye worker on 100k and they want to buy a new laptop, it costs 2000 inc vat, that PAYE worker has to earn about 3800 euro to get out 2000 in money to spend on that laptop.

self employed lad wants a laptop , that 2000 becomes 1626 + vat , thats taken out of pre tax profit and every year 12.5% of that is deducted again from profits for depreciation. in the end it costs the self employed person half what it costs the paye worker. So a gross self employed income of 50k can in many ways resemble a PAYE income of 100k.

To honest the post above shows a lack of understanding on how the income tax system works for self employed people.



Self employed people are not taxed at 12.5%. They have to pay the same income taxes as anyone else. Yes small companies can incorporate but then the owner is a director and the declarations that go with that from a tax perspective, have to pay income tax the same as any other PAYE worker and any money that is left in the company has to deal with the close companies surcharge.



If you don't incorporate you are taxed on your total revenue minus any allowable expenses. The profit is then taxed at more or less the normal income tax rates(Forget the exact slight differences in the taxes rates for a self employed person compared to PAYE)





You can't just dump all your household expenses under your business without the Revenue asking questions. Revenue have strict criteria on whats allowable and what isn't. Anyone who says anything else is making stuff up/exaggerating.

Laura2021

Laura2021 wrote: »

That's if they care about putting money into a pension and not something else.
Seems the people who work in Government jobs only care about pensions which you wont get until 68 years of age and probably go up again what's the chances of dieing before you get to enjoy it.
How much money will you actually need when your 70

An executive pension can be accessed from the age of 50 once you retire from the company that funded it. 25% of the fund can be taken as a tax free lump sum up to €200k ...... more can be taken at 20% tax rate up to €500k.

Eric Cartman

PeadarCo wrote: »

To honest the post above shows a lack of understanding on how the income tax system works for self employed people.



Self employed people are not taxed at 12.5%. They have to pay the same income taxes as anyone else. Yes small companies can incorporate but then the owner is a director and the declarations that go with that from a tax perspective, have to pay income tax the same as any other PAYE worker and any money that is left in the company has to deal with the close companies surcharge.



If you don't incorporate you are taxed on your total revenue minus any allowable expenses. The profit is then taxed at more or less the normal income tax rates(Forget the exact slight differences in the taxes rates for a self employed person compared to PAYE)





You can't just dump all your household expenses under your business without the Revenue asking questions. Revenue have strict criteria on whats allowable and what isn't. Anyone who says anything else is making stuff up/exaggerating.

Youve shown your lack of understanding, thats claiming back depreciation on chattles, not income tax rate.

Self employed people pay the same outrageous income tax rates as paye workers, just what spending is before or after that calculation is different

PeadarCo

Eric Cartman wrote: »

Youve shown your lack of understanding, thats claiming back depreciation on chattles, not income tax rate.

Self employed people pay the same outrageous income tax rates as paye workers, just what spending is before or after that calculation is different

Heres the thing from a tax perspective there absolutly no such thing as depreciation. Depreciation when an income tax computation is be calcaulated is always disallowed. Now there is a similar concept called capital allowances. But the cost is spread over a number of years and again there are strict conditions attached in order for an asset to qualify



To claim any asset for capital allowances or any expense to be included in an income tax calculation you have to show that they wholly and exclusively for the purpose of the trade. If you can't the asset/expense will be dissallowed. What you have to understand is accounting profit and taxable profit and two different things. They are both governed by a different set of rules.


In the case of a laptop you mentioned. A self employed person may be able to able to claim capital allowances on this if they can satisfy Revenue that its used in the person's business. If its used for personal use, Revenue may dissallow some or all of the assets value when the tax calculation is being done. However this is no different from any company which can also claim capital allowances on specified assets that they use. Generally PAYE workers don't have to buy their own equipment to do their jobs and wouldn't qualify for capital allowances as a result.



Also please understand why I have mentioned is only the basic's. Income Tax is a complex area. However the idea that you have suggested that a self employed person can put any expense they want against their taxable income simply isn't true.


If a person does decide to ignore the law, they will have to deal with all the penalties that come with that. It would also raise issues for tax consulants as most people use one to complete their income tax returns. If Revenue noticed that a conulstant was regularly giving bad advice it would raise questions on the income tax cacluations for all of that practices clients. The resulting hassle from Revenue audits would not be good for business.

Laura2021

Augeo wrote: »

An executive pension can be accessed from the age of 50 once you retire from the company that funded it. 25% of the fund can be taken as a tax free lump sum up to €200k ...... more can be taken at 20% tax rate up to €500k.

And how much would you have to pay out of your weekly/ monthly salary to get that ? Very few people will be retire at 50

Laura2021

Laura2021 wrote: »

That's if they care about putting money into a pension and not something else.
Seems the people who work in Government jobs only care about pensions which you wont get until 68 years of age and probably go up again what's the chances of dieing before you get to enjoy it.
How much money will you actually need when your 70

Augeo wrote: »

An executive pension can be accessed from the age of 50 once you retire from the company that funded it. 25% of the fund can be taken as a tax free lump sum up to €200k ...... more can be taken at 20% tax rate up to €500k.

Laura2021 wrote: »

And how much would you have to pay out of your weekly/ monthly salary to get that ? Very few people will be retire at 50

You stated you won't get a pension until 68, you mentioned that after a post about self employed folk and pensions.

I also said from the age of 50.

You can retire from self employment, cash in a quarter of your pension fund taxfree and get a job off someone or start a new venture. ....... you don't have to actually stop workiing, you just cut ties with the company that funded the pension.
Now, "And how much would you have to pay out of your weekly/ monthly salary to get that ?"
To get to what?
Using crude figures, throw €20k/annum into a fund with low fees that tracks the likes of the S&P500 and after 20 years there'd be over €1m in the pot.

If we are talking about self employed folk paying themselves €50k/annum but earning much more €20k/annum into a pension isn't out of context.

What tangent do you want to go off on next?

blanch152

PeadarCo wrote: »

Heres the thing from a tax perspective there absolutly no such thing as depreciation. Depreciation when an income tax computation is be calcaulated is always disallowed. Now there is a similar concept called capital allowances. But the cost is spread over a number of years and again there are strict conditions attached in order for an asset to qualify



To claim any asset for capital allowances or any expense to be included in an income tax calculation you have to show that they wholly and exclusively for the purpose of the trade. If you can't the asset/expense will be dissallowed. What you have to understand is accounting profit and taxable profit and two different things. They are both governed by a different set of rules.


In the case of a laptop you mentioned. A self employed person may be able to able to claim capital allowances on this if they can satisfy Revenue that its used in the person's business. If its used for personal use, Revenue may dissallow some or all of the assets value when the tax calculation is being done. However this is no different from any company which can also claim capital allowances on specified assets that they use. Generally PAYE workers don't have to buy their own equipment to do their jobs and wouldn't qualify for capital allowances as a result.



Also please understand why I have mentioned is only the basic's. Income Tax is a complex area. However the idea that you have suggested that a self employed person can put any expense they want against their taxable income simply isn't true.


If a person does decide to ignore the law, they will have to deal with all the penalties that come with that. It would also raise issues for tax consulants as most people use one to complete their income tax returns. If Revenue noticed that a conulstant was regularly giving bad advice it would raise questions on the income tax cacluations for all of that practices clients. The resulting hassle from Revenue audits would not be good for business.

Whenever I have lunch with a self-employed friend, they always take the receipt. Not only do I pay for my own lunch, but through the tax-refund he gets, I pay for my friends.

PeadarCo

blanch152 wrote: »

Whenever I have lunch with a self-employed friend, they always take the receipt. Not only do I pay for my own lunch, but through the tax-refund he gets, I pay for my friends.

And whats the big deal? This is something that is also effectively available to PAYE workers. Companies can provide subsidised canteens and employees can also claim lunch allowances subject to certain limits set out by Revenue. Now not all companies provide those things, but thats nothing to do with the tax system its do with what employers offer. And also remember for a self employed person the lunch is still an expense. Their saving at their marginal tax rate. ie if a lunch costs €10, a persons marginal rate is 55% the after tax cost to the self employed person of that lunch is €4.50 (Numbers made up for the example). Depending on the subsidies offered by a employer if they provide a canteen or other allowances the saving to a PAYE person may be far greater.


The only real difference in the example you have picked is that a self employed person can choose to classify the meal as a business expense(again this can audited by Revenue) where as the same benefit is only available to a PAYE person if their employer offers them the benefits. But thats down to the level of power a person who is self employed has over their own work versus a person who is employed by another person/organisation. But thats a conversation that includes more than just the tax implications.

blanch152

PeadarCo wrote: »

And whats the big deal? This is something that is also effectively available to PAYE workers. Companies can provide subsidised canteens and employees can also claim lunch allowances subject to certain limits set out by Revenue. Now not all companies provide those things, but thats nothing to do with the tax system its do with what employers offer. And also remember for a self employed person the lunch is still an expense. Their saving at their marginal tax rate. ie if a lunch costs €10, a persons marginal rate is 55% the after tax cost to the self employed person of that lunch is €4.50 (Numbers made up for the example). Depending on the subsidies offered by a employer if they provide a canteen or other allowances the saving to a PAYE person may be far greater.


The only real difference in the example you have picked is that a self employed person can choose to classify the meal as a business expense(again this can audited by Revenue) where as the same benefit is only available to a PAYE person if their employer offers them the benefits. But thats down to the level of power a person who is self employed has over their own work versus a person who is employed by another person/organisation. But thats a conversation that includes more than just the tax implications.

I can't meet a friend in a company canteen.

The self-employed friend picks up the receipt and claims the expense. Revenue don't even look at it. There is no business conducted, just two old friends meeting for lunch, but I pay for my lunch, and the taxpayer (me) pays again for my lunch and his.

Say two PAYE workers and one self-employed meet for lunch. No business is discussed. All pay €15 for the lunch, but the restaurant doesn't split the bill. The self-employed person takes the receipt and claims the lunch. With the tax relief, the self-employed person gets back €20.25, so not only does the taxpayer pay for the lunch of the self-employed, but the self-employed person goes home with an extra €5.25 in their pocket (plus any travelling expenses they claim back).

You would be extremely naive if you pretended this doesn't happen.

blanch152

blanch152 wrote: »

.................

The self-employed friend picks up the receipt and claims the expense. Revenue don't even look at it. There is no business conducted, just two old friends meeting for lunch, but I pay for my lunch, and the taxpayer (me) pays again for my lunch and his. ............

If it bothers you to the extent you b1tch and moan about it why not get your receipt after you pay for your lunch
I'm self employed but never put lunches with friends in as an expense. Your self employed friend seems to be taking the p1ss tbh.

PeadarCo

blanch152 wrote: »

I can't meet a friend in a company canteen.

The self-employed friend picks up the receipt and claims the expense. Revenue don't even look at it. There is no business conducted, just two old friends meeting for lunch, but I pay for my lunch, and the taxpayer (me) pays again for my lunch and his.

Say two PAYE workers and one self-employed meet for lunch. No business is discussed. All pay €15 for the lunch, but the restaurant doesn't split the bill. The self-employed person takes the receipt and claims the lunch. With the tax relief, the self-employed person gets back €20.25, so not only does the taxpayer pay for the lunch of the self-employed, but the self-employed person goes home with an extra €5.25 in their pocket (plus any travelling expenses they claim back).

You would be extremely naive if you pretended this doesn't happen.

But here's the thing you have now moved from complaining about the rules to a situation where you are complaining that Revenue isn't God and doesn't know everything. That's a very different argument. The rules with regard lunches do not give a self employed person a tax benefit compared to a PAYE person. Note if a company pays employees above the rates set by Revenue the employee may be subject to tax via benefit in kind(BIK) . These expenses are tax deductible for a company in the same way they are for a self employed person. And please note Revenue have a concept called "Civil Service rates" when determining the threshold for when BIK kicks in on different allowances. Hence why expense rates vary between companies. PAYE people have the benefit that their costs(employees can be given expenses at a flat rate and don't need to submit receipts) may be below what ever allowances they get and may actually make money on expenses that's untaxed.

I am naive enough to think fraud doesn't exist no but it cuts both ways.

McCrack

no such thing as a free lunch

Peregrinus

blanch152 wrote: »

Whenever I have lunch with a self-employed friend, they always take the receipt. Not only do I pay for my own lunch, but through the tax-refund he gets, I pay for my friends.

Why are you friends with a tax fraud? If you do not object to his behaviour, you can hardly demand that others should.

Yurt2

Peregrinus wrote: »

Why are you friends with a tax fraud? If you do not object to his behaviour, you can hardly demand that others should.

Indeed, cumulative behavior of instances like you highlighted led to the PAYE strikes of the late 70s / early 80s. A nod is as good as a wink in Ireland, then and now.

blanch152

blanch152 wrote: »

I can't meet a friend in a company canteen.

The self-employed friend picks up the receipt and claims the expense. Revenue don't even look at it. There is no business conducted, just two old friends meeting for lunch, but I pay for my lunch, and the taxpayer (me) pays again for my lunch and his.

Say two PAYE workers and one self-employed meet for lunch. No business is discussed. All pay €15 for the lunch, but the restaurant doesn't split the bill. The self-employed person takes the receipt and claims the lunch. With the tax relief, the self-employed person gets back €20.25, so not only does the taxpayer pay for the lunch of the self-employed, but the self-employed person goes home with an extra €5.25 in their pocket (plus any travelling expenses they claim back).

You would be extremely naive if you pretended this doesn't happen.

Revenue should look at it. A business lunch is a very specific thing. He would have to pay for it and it would be business related.

The receipt is probably not enough either - the sane way to justify this is a company credit card. Lots of expenses that don’t show up on the books wouldn’t survive an audit.

Travelling expenses?

Lumen

It is certainly true that running your own company, or being self employed, gives you more opportunities to break the law.

Not much of a revelation though.

Regarding the laptop example above, salaried employees are often provided with laptops and mobile phones by their employer which the Revenue are happy for them to use for personal use.

I haven't been an employee for twenty years but have never abused the tax system. I'm not sure whether it's because I'm a saint or scared of the slippery slope. Probably a mix of both. Revenue penalities and interest are very very expensive.

Carfacemandog

HillCloudHop wrote: »

How is the average wage calculation nonsense? Of course the median wage is going to be lower.

Funny enough in the US at least (much harder to find reliable historical info for Ireland), median wages used to reliably be higher than averaged until around the 1980s or 90s.

Peregrinus

Carfacemandog wrote: »

Funny enough in the US at least (much harder to find reliable historical info for Ireland), median wages used to reliably be higher than averaged until around the 1980s or 90s.

That seems surprising. Not doubting you, but can you elaborate on how this was?

Benedict

The original aim of this thread was to highlight the rampant confusion between the terms "average" (also called mean) and "median" wage. In my experience, the belief is widespread that because the "average" full time wage in Ireland is around 49k, then if you are full time and earn less than that, you are untypical.


In fact if you earn 75% of the "average", they your pay cheque is typical.


Economist Felim O'Rourke (The Journal Apr 19) gives the example of an office where 5 people work. 4 get 30k and the boss gets 80k. The average pay in that office is 40k - even though most don't get anything like 40k.


So when politicians proudly tell us that 49k is the "average", they should add that most people don't earn within an ass's roar of that amount.

Peregrinus

Benedict wrote: »

The original aim of this thread was to highlight the rampant confusion between the terms "average" (also called mean) and "median" wage. In my experience, the belief is widespread that because the "average" full time wage in Ireland is around 49k, then if you are full time and earn less than that, you are untypical.

In fact if you earn 75% of the "average", they your pay cheque is typical.

Economist Felim O'Rourke (The Journal Apr 19) gives the example of an office where 5 people work. 4 get 30k and the boss gets 80k. The average pay in that office is 40k - even though most don't get anything like 40k.

So when politicians proudly tell us that 49k is the "average", they should add that most people don't earn within an ass's roar of that amount.

But it's also the case that most people don't earn within an asses roar of the median.

Have a look at this table of household incomes that Augeo posted in post #280 in this thread:



It's not difficult to work out that the median household income falls into the €40-60k bracket. To illustrate the point, let's assume that it's €50k.

But only 19% of housholds are in the €40-60k bracket. The other 81% of households do not earn within 20% of the median household income; they are either more than 20% below it, or more than 20% above it.

Which tells you that - for household incomes, at any rate - earning the median income, or close to it, is actually untypical. It's much more typical to earn signficantly less or signficantly more. In this table, about 46% of households earn less than 80% of the median, and about 35% earn more than 120%.

Those figures may not be quite right, because the median may not be exactly €50k, and I'm eyeballing the percentages. But the overall picture is correct. Earning at or close to the median is untypical.

Buddy Bubs

We're going to have to bring variance and standard deviation into this thread

stefanovich

Peregrinus wrote: »

But it's also the case that most people don't earn within an asses roar of the median.

Have a look at this table of household incomes that Augeo posted in post #280 in this thread:



It's not difficult to work out that the median household income falls into the €40-60k bracket. To illustrate the point, let's assume that it's €50k.

But only 19% of housholds are in the €40-60k bracket. The other 81% of households do not earn within 20% of the median household income; they are either more than 20% below it, or more than 20% above it.

Which tells you that - for household incomes, at any rate - earning the median income, or close to it, is actually untypical. It's much more typical to earn signficantly less or signficantly more. In this table, about 46% of households earn less than 80% of the median, and about 35% earn more than 120%.

Those figures may not be quite right, because the median may not be exactly €50k, and I'm eyeballing the percentages. But the overall picture is correct. Earning at or close to the median is untypical.

It gets even more complicated to understand when the lower income households are actually getting social welfare payments on top of salary and paying little to no tax.

It'd be nice to see the distribution of net spendable income + welfare across these different classes of household.

Benedict

Peregrinus wrote: »

But it's also the case that most people don't earn within an asses roar of the median.

Have a look at this table of household incomes that Augeo posted in post #280 in this thread:



It's not difficult to work out that the median household income falls into the €40-60k bracket. To illustrate the point, let's assume that it's €50k.

But only 19% of housholds are in the €40-60k bracket. The other 81% of households do not earn within 20% of the median household income; they are either more than 20% below it, or more than 20% above it.

Which tells you that - for household incomes, at any rate - earning the median income, or close to it, is actually untypical. It's much more typical to earn signficantly less or signficantly more. In this table, about 46% of households earn less than 80% of the median, and about 35% earn more than 120%.

Those figures may not be quite right, because the median may not be exactly €50k, and I'm eyeballing the percentages. But the overall picture is correct. Earning at or close to the median is untypical.

Two points - firstly, you seem to be referring to "household" incomes and not individual full time workers. Secondly - in the example I gave of the office workers, most people not only earn within an ass's roar of the median, they earn precisely the median.

It's so demoralising for workers earning a good wage to be constantly given the impression (and impression do count) that they are not up to scratch in terms of wages when in fact they may be earning more than most.

Benedict

Benedict wrote: »

.............. In my experience, the belief is widespread that because the "average" full time wage in Ireland is around 49k, then if you are full time and earn less than that, you are untypical......................

I cannot accept that belief is widespread.
By definition loads earn less than the average and loads earn more.

I feel the entire thread is based on a misconception you dreamt up.

Peregrinus

stefanovich wrote: »

It gets even more complicated to understand when the lower income households are actually getting social welfare payments on top of salary and paying little to no tax.

It'd be nice to see the distribution of net spendable income + welfare across these different classes of household.

I think the chart is net household income, inclusive of earnings and transfers, so it reflects the effects of tax and SW. But I could be corrected on that.

More generally:

1. The phenomenon that Benedict points to is that earning at or close to the mean, or the median, is untypical; most people are well away from it.

2. This phenomenon depends not on how high or low the mean/median is (whichever your measuring; I'm just going to say median from now on but what I say would hold good for the mean as well); it depends on how widely distributed earnings are.

3. In a society in which most full-time workers earn broadly similar amounts, and there is relatively little career salary progression, or pay differences between different careers, etc, then more people will be at or close to the median. And vice versa.

4. So, if you think the phenomenon is a Bad Thing, then you favour a society in which earnings tend to be flattened; there's a high degree of income equality. This means that you get less differences in earnings to reflect (depending on your political point of view) (a) merit, productivity, utility, etc, or (b) privilege, good fortune or injustice, or (c) both.

5. In Ireland, distribution of gross incomes is quite unequal, by European standards, so differences in merit, productivity, utility, privilege, fortune and injustice are all well-reflected - arguably too well reflected. But the tax/social welfare system offsets this, with the result that net income equality is close to average for the EU and the OECD (with the result that the proporition of the workforce whose net income is at or close to the median is also likely to be at about the EU and OECD average). Whether this is a good thing or a bad thing depends, as I said earlier, on your political point of view.

ELM327

Buddy Bubs wrote: »

We're going to have to bring variance and standard deviation into this thread

That's kind of what the bar chart and explanation is doing in pseudo standard deviation !

Geuze

Benedict wrote: »

The original aim of this thread was to highlight the rampant confusion between the terms "average" (also called mean) and "median" wage. In my experience, the belief is widespread that because the "average" full time wage in Ireland is around 49k, then if you are full time and earn less than that, you are untypical.

Is that "belief widespread"? Nobody has ever mentioned it to me.

Geuze

Peregrinus wrote: »

But it's also the case that most people don't earn within an asses roar of the median.

Have a look at this table of household incomes that Augeo posted in post #280 in this thread:

It's not difficult to work out that the median household income falls into the €40-60k bracket. To illustrate the point, let's assume that it's €50k.

But only 19% of housholds are in the €40-60k bracket. The other 81% of households do not earn within 20% of the median household income; they are either more than 20% below it, or more than 20% above it.

Which tells you that - for household incomes, at any rate - earning the median income, or close to it, is actually untypical. It's much more typical to earn signficantly less or signficantly more. In this table, about 46% of households earn less than 80% of the median, and about 35% earn more than 120%.

Those figures may not be quite right, because the median may not be exactly €50k, and I'm eyeballing the percentages. But the overall picture is correct. Earning at or close to the median is untypical.

Be careful - earnings are not the same as incomes.

This thread is mainly about earnings, although incomes have been discussed.

Mean and median earnings will be different to mean and median incomes.

Geuze

Benedict wrote: »

It's so demoralising for workers earning a good wage to be constantly given the impression (and impression do count) that they are not up to scratch in terms of wages when in fact they may be earning more than most.

If the top of my scale is €x, I have plenty of colleagues earning up to 1.5 €x.

I do not feel that "I am not up to scratch".

Geuze

Peregrinus wrote: »

B
It's not difficult to work out that the median household income falls into the €40-60k bracket. To illustrate the point, let's assume that it's €50k.

Median household incomes, 2019

https://www.cso.ie/en/statistics/socialconditions/surveyonincomeandlivingconditionssilc/


Gross = 51,217
Disposable = 43,552

Benedict

Geuze wrote: »

If the top of my scale is €x, I have plenty of colleagues earning up to 1.5 €x.

I do not feel that "I am not up to scratch".

Of course no matter what you earn there will be those earning more and one accepts that. But the phrase "below average" has deep resonance for people and according to what we hear from politicians (check it for yourself), you're "below average" if you're earning, let's say, 40k.


In fact, if you're earning 40k, you're earning more than most ftw in the country! But that's not what we're being told.


It's a clear case of mis-information.

In his Journal article (already quoted) O'Rourke reckons that 64% of ftw earn less than the average - but not less than the median.