It’s been well documented that reports of Australians’ incomes sometimes betray a fair bit of ignorance about what constitutes a typical or a high income. I’ve been interested in whether most Australians share this tendency of some journalists to imagine that a family comfortably ensconced in the upper echelons of the income distribution is actually on a ‘middle income’. Do people really think that $150 000 or $200 000 a year is typical?

A recent Essential Report by EMC tried to find this out. They asked a sample of respondents what they perceive to be a middle income and what they regard as a sufficient income to qualify as well off or wealthy. They asked this question about both households and individuals. It turns out that Australians have quite a realistic sense of what constitutes a typical income in today’s Australia.

The median response to EMC’s question about how much income would define a household as ‘middle income’ was $94 000 per year. A gross income of $94 000 would have put a household at around the 64th percentile of the household income distribution in 2009-10, when the last ABS household income survey was conducted. Australians’ understanding of what qualifies as a middle income isn’t too far the mark.

The research showed that people regard $111 000 per year as enough to make you ‘well off’, while $159 000 makes you ‘wealthy’. This doesn’t quite square with reports that households on over $150 000 are doing it tough. $111 000 would put a household at around the 72nd percentile of the distribution, while a household on $159 000 per year would be earning more than about 87% of Australian households (again, using 2009-10 numbers).

People in the EMC poll thought that an individual who earns $66 000 a year was on a middle income. This figure is just below the average earnings of a full-time worker, a bit above the median for a full time worker. This is a little high for an estimate of the median individual income, but is definitely in the range of what would be considered as a middle income. The research suggested  that an income of $106 000 a year was enough to make an individual wealthy, in the eyes of their fellow Australians. Given that this is around 50% above the mean for a full-time worker, and not far off double the median, it seems reasonable to agree that such an income is relatively high.

The evidence is quite clear: reports which suggest that households in the top 10% or 20% of households are actually ‘typical’ don’t square with the facts, and they don’t square with Australians’ views about what qualifies as a middle income. It’s worth bearing this in mind as another federal budget looms.

[Note: ideally, such a survey would ask people to think about working age households, or households in which at least one person worked. Respondents would also be asked to define what they thought was a middle income for a particular household type – say a family with two adults and two children. This would enable us to compare their responses to the data on equivalised incomes.]

UPDATE: Someone from EMC has helpfully made contact with me to clarify one point about their survey – they did actually ask respondents to define ‘middle income’ (etc.) for a household of 2 parents and 2 children.