I have previously mentioned–and sometimes quoted–my friend Morton Marcus. Marcus is an economist; he is retired from Indiana University, where for many years he headed up the Kelly School’s business research center. Morton and I have been friends for a long time, and have just co-authored a book on the women’s movement. (More on that when it’s published.)
Morton also writes a weekly column on economic data called “Eye on the Pie,” explaining in relatively simple language what various data points tell us about Indiana. That column runs in a number of the remaining small newspapers around the state. In a recent column, he made a point that I think is so important I feel compelled to share it.
Morton fashioned his column as “A note to Gov. Holcomb,” and began by saying that normally, he doesn’t write to the Governor.
But this week is different. A few days ago, you gave your “State of the State” address to the General Assembly. It was a nice talk and very well presented.
You had some good ideas for our state, but, and this is awkward for me to say, you don’t have a staff that keeps you from making the same mistake time-after-time. You’re not the only Governor who makes this mistake. I’ve known them all from Gov. Whitcomb onwards and they all make the same mistake.
And what was that mistake? (I must admit, it’s an error I have often made too.) Let Morton explain:
Almost always the Indiana Economic Development Corporation (IEDC – bless their hearts) tells us the average wage going to be paid by a firm they have arranged (lured, bribed) to open or expand in Indiana.
Most of the media (bless their hearts) regurgitate the press release because they don’t have the time or energy to remember that the average is the mean of a set of numbers. It can be heavily influenced by extreme (high or low) values.
The median, however, tells a different, more meaningful story (if you’ll excuse a little pun there). The median is the wage above which half of the employees will get paid and below which the other half of the workers will be paid.
Let’s say the top gun gets paid $150,000 per year. The #2 gets $75,000, the other eight get $30,000 each. That’s a total payroll of $465,000 for ten employees or an average (mean) annual wage of $46,500. Yet the median pay is $30,000. That’s $16,500 (35%) below the IEDC-advertised average.
From what I hear, Governor, you’re not the type who intentionally misleads or lies to the people of Indiana. But by using the average (mean), rather than the median figure, you’ve been passing on some real whoppers over the years.
If I might have just a bit more of your attention, let me note the average (mean) annual pay for all occupations in Indiana in 2021 was $50,440 (37th in the nation) or $12,110 (32%) above the median Hoosier pay of $38,330 (39th among the 50 states).
With just two years left in your term of office, you said you were going to work harder than ever for all Hoosiers. Maybe you could get IEDC and your staff to give you the most accurate, realistic numbers. Then the people of Indiana would not continue to be misled by excess enthusiasm and just plain ignorance.
When I read this column, it immediately reminded me of a book I read several years ago, debunking several of the claims that were then being made about the “failures” of the nation’s public schools. The authors noted that much of the data being uncritically reported about “averages” was similar to the rather misleading result one would get when averaging a mouse with an elephant.
If you average my income with that of Bill Gates, you’ll come up with a pretty impressive average…
Actually, Morton’s column does inadvertently highlight a failing of the education system: too many Americans (including, I am sorry to say, the one writing this blog) are innumerate–lacking a basic knowledge of mathematics and arithmetic. That innumeracy encourages the use of statistics to mislead. As the saying goes: statistics don’t lie, but liars (and innumerate folks) do use–or misuse– statistics.
The Governor’s error perpetuates the erroneous belief that Indiana is succeeding with an economic development approach that relies almost entirely on keeping the state’s taxes low–and ignores the fact that those low tax rates prevent the state from spending tax dollars to achieve a quality of life that would be far more likely to attract the businesses and skilled workers we need.
More on that to come….