Average household income, or as called more precisely by the Census Bureau, mean household income, is quite different from median household income. For example, a city’s median household income is the income of the household that’s at the 50% point of the entire distribution of households in that city. In contrast, the mean household income is the average of all the households and their respective incomes for the entire city.
This difference between median and mean, or average, household income is crucial to understand: Average household income can be distorted by a small number of households that earn outsized incomes compared to the rest of the area; these high-income households will then “pull” the average household income for, say, a county upward. However, these high-income households do not have the same effect on the median household income since that’s simply the household whose income is right at the halfway mark between the whole range of households, from the lowest-earning to the highest-earning, in a given area. Thus, a large difference in a city or county between its mean household income and its median household income implies that income inequality is an issue.
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