Tyler Cowen is asked a good question: are there any goods someone on a median income can afford which are the very best of their kind? The answer, as Tyler shows, is plenty – including some important ones such as books and recorded music. To this we might add that even where the very best goods are unaffordable, the median income earner can afford pretty decent ones, such as cars, TVs and sound systems.
Which poses the question: if someone on a median income can afford such a luxurious cornucopia, what can’t he buy?
The obvious answer, in the UK, is a decent house. The average house costs over £208,000, equivalent to 7.5 times median annual earnings. Given that the bestschools tend to be in the most expensive areas, this means that our median earner can’t afford the best education for his kids either.
However, I suspect that most of the best things that the median income-earner can’t buy are non-material goods.
One is financial security. 49% of people, and most 35-44 year-olds live in households with less than £5000 of net financial wealth (pdf). They are only a pay cheque or two away from trouble.
Another is status. Our wages are related to our sense of worth – which is one reason why most people would prefer (pdf) a lower but above-average income to a higher but below-average one. A median income, by definition doesn’t provide much status.
You might reply that this problem would be solved if we could shake off envy. Not entirely. Status is one mechanism whereby income leads to political power: