Median Household Income Levels

Factual Questions
1

According to this, as of 2010 the Median Household Income (MHI) of the US was $29,056, and for Canada it was $27,721.

However the MHI for Mexico was $4,456. That’s a huge difference compared to the US or Canada. The MHI of Chile was $8,466, almost twice that of Mexico.

Canada doesn’t have the huge industrial base that the US does, yet their MHI is comparable.

The population of the US is 316,345,000, of Mexico is 117,409,830, of Canada is 35,141,542 and of Chile is 16,634,603, so MHI isn’t related to size.

If you compare the MHI of the UK ($23,182), France ($23,289) or Germany ($24,152) with Spain ($17,705), you would also notice a difference. Does the fact that Mexico was conquered by the Spanish, as opposed to the English, make any difference?

Mexico doesn’t have the vast natural resources that the US has, but many countries in Europe don’t have vast resources yet have a much higher standard of living then Mexico. For example the MHI of Luxembourg is a staggering $36,399.

So what explains the huge difference in MHI between Mexico and its northern neighbors? I can’t believe that corruption, even at the most basic levels, can have that large an impact on household income.

2

Just to clear up one thing, the numbers you are citing aren’t median household income (which for the U.S. in 2011 was $50,054), but (per your link) something a bit different:

I’m not familiar with the relationship between median household income, and this other figure.

3

I think the basic answer to this is government. Rich countries tend to have stable, effective, predictable and relatively uncorrupted governments.

4

It may not just be corruption, but it definitely ties into the politics of Mexico. Just think: in the early part of the last century, they had a shooting war over an attempt to ban Cathlics. And I haven’t heard anything good about the way they nationalized the oil industries.

More to the point, economics sometimes gives you cases where the whole is more than the sum of the parts. Where would Vegas be if it only had three casinos? It works because it has dozens… the more there are, the better they do, because it makes Vegas more and more the go-to place for that kind of vacation. Where would Silicon Valley be if it only had three tech companies?

Or look at cities like Seattle. Without cheap hydroelectric power, it wouldn’t have been a preferred region for aluminum production. Without cheap aluminum, no Boeing. Without the jobs and education that Boeing brought in, you might not have Microsoft or Amazon here. In other words, without all the right pieces, Seattle remains a place for fishermen and lumberjacks (with a smattering of dock workers and Navy men). If government corruption can knock out just one component from this chain, then you get a city making half the median income it has now.

5

It looks like this latter is trying to focus on an the individual adult income rather than combining the income of all adults in a household. Failing to do so would make the results highly dependent on whether most households were single earners or extended families. Thus for comparing different cultures this equivalent adult income measure is probably the way to go.

6

A Mexican mechanic will work on your car for two dollars an hour shop labor, and an American for $90 per hour, of which the mechanice gets $15. Same productivity, but only a tiny fraction of the money moves through the economy for the same transaction. The car owner can afford it, the mechanic can live on it, and a (somewhat) similar standard of living is enjoyed by both.

The corruption, if there is any, is in the US, where an army of legislators have mandated regulations, fees and taxes at the repair shop that eat up most of the $90 an hour, such as property tax, insurance, safety equipment, advertising, “cost of doing business”… Most of that money is just pushed around in big circles, with little or no actual productivity taking place, but it all forms component parts of the cumulative “median income”.