On January 7, 2018, The News Journal had an articleabout the wonderful employment numbers for B.Braun’s new development. The article said that B.Braun pledged to create 175 new jobs that paid an average wage of at least $41,936 per year. These pledged jobs were part of an incentive package that gave B.Braun $8.2M from the state, county, and city.
And now, the article says, B.Braun sent the city a letter saying they’ve met their first round of metrics in the incentive package. By October 31, 2017 they’ve hired 38 new full-time equivalents (FTEs) with an average annual wage of $68,171.
All good news you might think. But notice the discrepancy? The News Journal talks about an average wage and B.Braun talks about an average FTE wage.
Why does that matter? We have too many working poor in our community. When we give away money to attract “high paying” jobs, we’d better make sure we understand the basis for the negotiations. If we’re not careful, we can end up with a few jobs that truly are highly paid and many part time positions that are not. It all depends on the method of calculating a summarized view of wages.
A Few Definitions and Demonstrations
Definition of a full-time equivalent (FTE): An FTE is the hours worked by one employee on a full-time basis. The concept is used to convert the hours worked by several part-time employees into the hours worked by full-time employees. On an annual basis, an FTE is considered to be 2,080 hours, which is calculated as: 8 hours per day. x 5 work days per week.
That means four people could work 10 hours a week and all four would be considered one FTE. In total, they would earn B.Braun’s average FTE wage of $41,936 but the average wage would be $10,484. Does that type of employment lead to prosperity?
Now to get a little more into the weeds on geeky math, so far all they’ve been talking about is the average wage and average FTE. But what would be a more accurate depiction of the actual money going home in pockets would be the median wage.
A generic definition of average: The sum of all the numbers in the set divided by the amount of numbers in the set. For example – 1+2+3+3+3+3+3+5+6+10+1,000=1,039 1,039/11=94.45
A generic definition of median: The middle point of a number set, in which half the numbers are above the median and half are below. For example – using the same 11 numbers as in the average above, 1 2 3 3 3 3 3 5 6 10 1000 The median=3
If you pretend these 11 numbers represent the wages, reporting the average wage = $94.45 is very misleading. The median wage of $3 is a more accurate depiction of the wages earned by the most people and what they will have to spend in our community.
Average vs Median Wages, The News Journal, and B.Braun
As you can see by the example below, a more meaningful number would be median by employee count since this more accurately reflects the impact of these five jobs on the community. The city should have negotiated on that basis and The News Journal should have reported it on that basis. At the very least the article should have listed the top 20 paid positions.
Reporting that they have 38 jobs with an average FTE wage of 68K will be picked and touted as great progress when in fact it may be very misleading. We cannot solve the problem of the working poor until we accurately report the statistics that help to create them.
You Have to Ask
Who is negotiating these deals for the city? Was the deal negotiated on average FTE or average by employee count? Why didn’t they negotiate on median wage? The devil is in the details here and once again I am not sure anyone is paying enough attention to these details.
There’s a short book called How to Lie with Statistics by Darrell Hoff. Perhaps city staff should read it because I’ll bet someone negotiating for B.Braun has.