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classixuk

The Law Of Averages

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Hi everyone.

I felt that it may be interesting for us to collect some data about just how the "average" wage/house/job is viewed and the differences in what we believe the "averages" stand for.

The results could make an extremely interesting press release by housepricecrash.co.uk, and one I belive most journalists would be keen to publish.

My understanding has always been that the average of something is the sum of the group divided by the amount in the group i.e. the sum of 10 peoples wages divided by 10.

I imagined a survey of one guy on £100,000 p.a. and five workers on £20,000 p.a. This gave me an average wage of £33,333 per annum. Multiply that by 3.5 (as if these people were applying for a mortgage) and you end up at £116,665.

The problem though is that all of the group bar one are only on £20,000p.a. which gives a mortgage of £70,000. Average wage doesn't seem to matter.

Just how skewed is average wage?

I am no mathematician so could somebody tell me...how many more people earning £20,000p.a. need to join the survey with our one big earner in order for the "average" wage of the group to reflect anywhere near £20,000?

Thanks.

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classixuk,

Could be an interesting thread..

Looking at the low pay rates it looks like low pay has gone nowwhere over a three year period (except for the movement of the minimum pay rate upwards between 2002/2004. The overall distribution seems to have not moved one bit.

http://www.lowpay.gov.uk/lowpay/lowpay2005/chapter2c.shtml

http://www.lowpay.gov.uk/lowpay/lowpay2005/images/2_29.gif

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The more people who join the survey at £20000 the less the average will be.

What is important is how many people there are below the average-

if you have one worker at £100K and five at £20K but one at approx £7K (part time) then you end up nearer an average of £20K

Of course this is part of the problem. We have a small number of very higher earners in the country that skew the figure upwards. So in order to achieve an average that is substantially below threse very high earnings then a large number of people will need to be earning below the average.

These are the people who struggle when there is unrpecedented growth - they get left behind because they can not compete in a world that is geared towards skewed averages.

Far more important is the mode (the wage most people earn) and the spread across the data (range and standard deviation).

Averages mean nothing if you don't have basic knowledge about the data.

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Blimey, looks like I'm the only one voting for medians :unsure: .

I'm damn sure that's what the government uses as the average, especially for house prices.

Edited by ajh

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Some huge disparities can start to occur when you compare wages from different generations.

Compare a couple of biggies from the 70's to now.

70's

Free company pensions for many

Largely untaxed perks such as cars

Now

Free or even contributory defined benefit pensions disappearing or being hugely reduced by all sorts of means.

Car is more of a tax burden than a perk.

also aren;t the main averages based on full-time earnings - what are the short time working / part time workers earning in relation to these figures - what proportion of the population is working part-time or indeed on short term contract - that is another big issue - what is better a £20K permanent job or a £25K job that could be gone at a month's notice? Hardly something to be making 25 years commitments on at 5/6x your salary.

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Ah, the joy of averages - it can disguise so much (but I don't think I need to tell many HPC-ers that!). When also given the median (i.e. the value of the exact mid-point of the data) and the mode (the most prevalent item of data within the set) one can start to get a better picture of the amount of deviation that can be hidden by a simple average.

With regard to average wages, check out this link for the Annual Survey of Hours and Earnings 2005 (ASHE), which details the average and median wages for many areas of the country. The differences between the two can be quite eye-opening.

Kind regards.

Cheston

[edited for spelling - butterfingers! :rolleyes: ]

Edited by Cheston Pelvis

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Far more important is the mode (the wage most people earn) and the spread across the data (range and standard deviation).

Averages mean nothing if you don't have basic knowledge about the data.

The problem (at least what I believe to be the problem), is that the great British public believe that the Mode wage (thanks for that) is what the government term Average wage. It would certainly be more helpful if the Government released the figures of the Mode wage, but I bet they wouldn't dare!

A friend of mine owns a gift shop in Liverpool City Centre and she lost her manager last year. Reason? The manager wanted a massive pay increase stating that the average wage is £30,000+!

This could be an extremely interesting thread and hopefully if we get enough replies the data can be used to write a press release and sent out -

Why Average Joe May Not Be So Average After All

A group of lobbyists across the UK comprising of parents, employers and industry professionals have today launched a petition upon the government to mind it's language.

The petition was served after research showed that most British people are confused by exactly what the Government mean by the term "average".

Over X thousand people were invited to take part in the survey by the internet site www.housepricecrash.com and the results were "quite literally astounding" according to the site moderator Charlie the Tramp.

Charlie commented that, "According to ODPM the average wage in the UK in 2004 was £31,000; however the results of our survey showed that 86% of the British public wrongly beleive this to mean that most workers in the country are earning this amount".

It doesn't stop with the government either. Estate agents such as HSBOS and Nationwide are in the firing line too. When asked what they....blah blah blah

Do you get what I mean?

I'm sure that someone using this board will be good with words and presentation. Hey, Charlie, didn't you used to work for a newspaper?

This could be great. It could say at the end of the article "To see the full results of the survey log on to HPC.co.uk".

Ooohhh, I'm all excited! :ph34r:

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Far more important is the mode (the wage most people earn) and the spread across the data (range and standard deviation).

The mode is worthless for looking at continuous (or pseudo-continuous) distributions like salaries and house prices, although it has some value in looking at salary ranges as opposed to actual salaries.

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The mode is worthless for looking at continuous (or pseudo-continuous) distributions like salaries and house prices, although it has some value in looking at salary ranges as opposed to actual salaries.

Zorn,

Did you use some type of 'obfuscation' software to make that post?

I haven't a clue what you are talking about! Sorry.

:blink:

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Zorn,

Did you use some type of 'obfuscation' software to make that post?

I haven't a clue what you are talking about! Sorry.

Just as an example, the mode house price in every region is either £119,999 or £249,999 -- the highest price before stamp duty increases. So it tells you next to nothing about actual house prices.

And here's the other example I posted last month in a different thread:

Assume that only ten people work in Tower Hamlets, and their salaries are:

£14,782.34

£14,934.17

£15,043.12

£15,123.45

£23,456.12

£34,653.98

£34,564.24

£34,564.45

£47,894.12

£47,894.12

(Clearly, £47,894.12 is the top of a pay-scale somewhere.)

Now, source A has access to salaries to the nearest £1,000, and quotes a mode of £15,000, because four people make that. Source B has better figures and knows salaries to the nearest pound. He quotes a mode of £34,564, because three people make that. Source C has the best figures of all, and knows salaries to the nearest penny. He quotes a mode of £47,894.12, because two people make that. What is the value of any of these three figures?

On the other hand, the median is £29,055.05 (if you interpolate), and the mean is £28,291.01, and you can actually draw some sensible conclusions from these figures.

Edited by zorn

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Guest magnoliawalls

This could explain why so many different "average" figures are used.

I wonder if the modal average house price is more than 4 times the modal average salary.. :huh:

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Just as an example, the mode house price in every region is either £119,999 or £249,999 -- the highest price before stamp duty increases. So it tells you next to nothing about actual house prices.

And here's the other example I posted last month in a different thread:

Assume that only ten people work in Tower Hamlets, and their salaries are:

£14,782.34

£14,934.17

£15,043.12

£15,123.45

£23,456.12

£34,653.98

£34,564.24

£34,564.45

£47,894.12

£47,894.12

(Clearly, £47,894.12 is the top of a pay-scale somewhere.)

Now, source A has access to salaries to the nearest £1,000, and quotes a mode of £15,000, because four people make that. Source B has better figures and knows salaries to the nearest pound. He quotes a mode of £34,564, because three people make that. Source C has the best figures of all, and knows salaries to the nearest penny. He quotes a mode of £47,894.12, because two people make that. What is the value of any of these three figures?

On the other hand, the median is £29,055.05 (if you interpolate), and the mean is £28,291.01, and you can actually draw some sensible conclusions from these figures.

SPOT ON...

As were my caps..

and that is without someone trying to skew the figures..

I remember watching that old guiness advert...

89% of statistics are made up on the spot..

a friend seeing it did quip "how did they know that?" before he caught on a looked a little embarrased..

so statistics do have a place.. but statistics gathered by someone else may not..

people say the last crash dropped 20%.. I remember clearly that prices dropped 50%..

as in the house that bought for x at peak sold for x/2 at bottom.. but was that jsut the examples I saw?

Devon is one of the areas that swings massivly.. We get paid less in Devon.. but then we talk funny and chew straw so who would pay us more ;)

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  • 331 Brexit, House prices and Summer 2020

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      • down 5% +
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      • Even
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