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$75,000 ain’t what it used to be

A series of charts and tables will help readers better understand yesterday’s front page story about Household Incomes in American Samoa.

Firstly, the headline (“More people earning $75,000 and above”) was misleading.

There are probably “more people earning $75,000 and above”, but the new census data (which forms the basis for the story) refers to household incomes, not the earnings of individual people.

The US Census reports on the total income received by households. American Samoa had almost 10,000 households in 2010, and a total population of about 55,000 people. Therefore the size of an average household was between 5 and 6 people.

Most households have more than one source of income and the census reports on the combination of all the income sources, including not only salaries and wages, but also social security benefits, retirement benefits, disability benefits, net rental profits, remittances (money sent home from overseas aiga), interest, dividends, and all other forms of income.

As an example, imagine a typical household of six people that includes two parents, a grandparent and three children. The household is counted in the top income category of “$75,000 and above” even though nobody in the household earns a salary higher than $20,000 a year.

(See charts at bottom of story.)

SOURCE  AND AMOUNT

Husband:  $20,000

Wife: $20,000

Wife’s father: ASG retirement benefits and social security: $20,000

Husband’s veteran benefits: $12,000

Net rental income (small house rented out): $6,000

TOTAL HOUSEHOLD INCOME:            $78,000

Thinking about household income in this way makes it easier to understand how so many American Samoa households (10% of all households) are in the top income bracket, of $75,000 and above.

Yesterday’s story also erroneously overstated how much inflation has eaten away at the purchasing power of $1 over the years. Using ASG statistics, we can conclude that it took $1.55 in 2010 to buy the same amount of goods and services as could be purchased with $1 in 2000.

In other words, a household with $10,000 in income in 2000 would need $15,500 to have the same purchasing power in 2010. However, the preliminary results from the 2010 census indicate that, on average, households only increased their income by about 30%, which is far lower than the 55% increase that would be needed to preserve a household’s purchasing power due to the effects of inflation.

As all residents of American Samoa know, the cost of living has been rising fast in the last few years, and the purchasing power of a dollar continues to erode at a rapid rate.

Too many words? The charts found below might help you grasp all these numbers. Still have questions? Email lewis@tiotala.com

Click to Enlarge


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