Household income is an economic measure that
can be applied to one household, or aggregated across a large group such as a county, city,
or the whole country. It is commonly used by the United States government
and private institutions to describe a household's economic status or to track economic trends
in the US. One key measure is the real median level,
meaning half of households have income above that level and half below, adjusted for inflation.
According to the Census, this measure was
$61,372 in 2017, an increase of $1,063 or 1.8% versus 2016, the second consecutive record
level year. This measure was $60,309 in 2016 (up $1,833
or 3.1% vs. 2015) and $58,476 in 2015 (up $2,863 or 5.1% vs. 2014).The distribution
of U.S. household income has become more unequal since around 1980, with the income share received
by the top 1% trending upward from around 10% or less over the 1953–1981 period to
over 20% by 2007. After falling somewhat due to the Great Recession
in 2008 and 2009, inequality rose again during the economic recovery, a typical pattern historically. == Definition ==
A household's income can be calculated in various ways but the US Census as of 2009
measured it in the following manner: the income of every resident of that house that is over
the age of 15, including wages and salaries, as well as any kind of governmental entitlement
such as unemployment insurance, disability payments or child support payments received,
along with any personal business, investment, or other recurring sources of income.The residents
of the household do not have to be related to the head of the household for their earnings
to be considered part of the household's income.
As households tend to share a similar economic
context, the use of household income remains among the most widely accepted measures of
income. That the size of a household is not commonly
taken into account in such measures may distort any analysis of fluctuations within or among
the household income categories, and may render direct comparisons between quintiles difficult
or even impossible. == Recent trends == The U.S. Census Bureau reported in September
2017 that real median household income was $59,039 in 2016, exceeding any previous year.
This was the fourth consecutive year with
a statistically significant increase by their measure.Changes in median income reflect several
trends: the aging of the population, changing patterns in work and schooling, and the evolving
makeup of the American family, as well as long- and short-term trends in the economy
itself. For instance, the retirement of the Baby Boom
generation should push down overall median income, as more persons enter lower-income
retirement. However, analysis of different working age
groups indicate a similar pattern of stagnating median income as well.Journalist Annie Lowrey
wrote in September 2014: "The root causes [of wage stagnation] include technological
change, the decline of labor unions, and globalization, economists think, though they disagree sharply
on how much to weight each factor. But foreign-produced goods became sharply
cheaper, meaning imports climbed and production moved overseas. And computers took over for humans in many
manufacturing, clerical, and administrative tasks, eroding middle-class jobs growth and
suppressing wages."Another line of analysis, known as "total compensation," presents a
more complete picture of real wages. The Kaiser Family Foundation conducted a study
in 2013 which shows that employer contributions to employee healthcare costs went up 78% from
2003 to 2013.
The marketplace has made a trade-off: expanding
benefits packages vs. increasing wages. Measured relative to GDP, total compensation
and its component wages and salaries have been declining since 1970. This indicates a shift in income from labor
(persons who derive income from hourly wages and salaries) to capital (persons who derive
income via ownership of businesses, land and assets). This trend is common across the developed
world, due in part to globalization. Wages and salaries have fallen from approximately
51% GDP in 1970 to 43% GDP in 2013. Total compensation has fallen from approximately
58% GDP in 1970 to 53% GDP in 2013.However, as indicated by the charts below, household
income has still increased significantly since the late 1970s and early 80s in real terms,
partly due to higher individual median wages, and partly due to increased opportunities
for women.
According to the CBO, between 1979 and 2011,
gross median household income, adjusted for inflation, rose from $59,400 to $75,200, or
26.5%. However, once adjusted for household size
and looking at taxes from an after-tax perspective, real median household income grew 46%, representing
significant growth. == Uses ==
Use of individual household income: The government and organizations may look at one particular
household's income to decide if a person is eligible for certain programs, such as nutrition
assistance or need-based financial aid, among many others. Use at the aggregate level: Summaries of household
incomes across groups of people – often the entire country – are also studied as part
of economic trends like standard of living and distribution of income and wealth.
Household income as an economic measure can
be represented as a median, a mean, a distribution, and other ways. Household income can be studied across time,
region, education level, race/ethnicity, and many other dimensions. As an indicator of economic trends, it may
be studied along with related economic measures such as disposable income, debt, household
net worth (which includes debt and investments, durable goods like cars and houses), wealth,
and employment statistics. == Median inflation-adjusted ("real") household
income == Median inflation-adjusted ("real") household
income generally increases and decreases with the business cycle, declining in each year
during the periods 1979 through 1983, 1990 through 1993, 2000 through 2004 and 2008 through
2012, while rising in each of the intervening years.
Extreme poverty in the United States, meaning
households living on less than $2 per person per day before government benefits, more than
doubled from 636,000 to 1.46 million households (including 2.7 million children) between 1996
and 2011, with most of this increase occurring between late 2008 and early 2011. === CBO income growth study ===
The nonpartisan Congressional Budget Office conducted a study analyzing household income
throughout the income distribution, by combining the Census and IRS income data sources. Unlike the Census measure of household income,
the CBO showed income before and after taxes, and by also taking into account household
size.
Also, the CBO definition of income is much
broader, and includes in kind transfers as well as all monetary transfers from the government. The Census' official definition of money income
excludes food stamps and the EITC, for example, while CBO includes it. Between 1979 and 2011, gross median household
income, adjusted for inflation, rose from $59,400 to $75,200, or 26.5%. This compares with the Census' growth of 10%. However, once adjusted for household size
and looking at taxes from an after-tax perspective, real median household income grew 46%, representing
significant growth.While median gross household income showed much stronger growth than depicted
by the Census, inequality was shown to still have increased. The top 10% saw gross household income grow
by 78%, versus 26.5% for the median. The bottom 10%, using the same measure, saw
higher growth than the median (40%). == Mean household income ==
Another common measurement of personal income is the mean household income. Unlike the median household income, which
divides all households in two halves, the mean income is the average income earned by
American households. In the case of mean income, the income of
all households is divided by the number of all households.
The mean income is usually more affected by
the relatively unequal distribution of income which tilts towards the top. As a result, the mean tends to be higher than
the median income, with the top earning households boosting it. Overall, the mean household income in the
United States, according to the US Census Bureau 2014 Annual Social and Economic Supplement,
was $72,641.The US Census Bureau also provides a breakdown by self-identified ethnic groups
as follows (as of March 2014): == Mean vs. median household income ==
Median income is the amount which divides the income distribution into two equal groups,
half having income above that amount, and half having income below that amount. Mean income (average) is the amount obtained
by dividing the total aggregate income of a group by the number of units in that group. The means and medians for households and families
are based on all households and families. Means and medians for people are based on
people 15 years old and over with income. == Aggregate income distribution ==
The aggregate income measures the combined income earned by all persons in a particular
income group. In 2007, all households in the United States
earned roughly $7.723 trillion.
One half, 49.98%, of all income in the US
was earned by households with an income over $100,000, the top twenty percent. Over one quarter, 28.5%, of all income was
earned by the top 8%, those households earning more than $150,000 a year. The top 3.65%, with incomes over $200,000,
earned 17.5%. Households with annual incomes from $50,000
to $75,000, 18.2% of households, earned 16.5% of all income. Households with annual incomes from $50,000
to $94,000, 28.12% of households, earned 28.8% of all income. The bottom 10.3% earned 1.06% of all income. == Household income and demographics == === Racial and ethnic groups === White Americans made up roughly 75.1% of all
people in 2000, 87.93% of all households in the top 5% were headed by a person who identified
as being White alone. Only 4.75% of all household in the top 5%
were headed by someone who identified as Hispanic or Latino of any race, versus 12.5% of persons
identifying themselves as Hispanic or Latino in the general population.Overall, 86.01%
of all households in the top two quintiles with upper-middle range incomes of over $55,331
were headed by someone identifying as White alone, while 7.21% were being headed by someone
who identified as Hispanic and 7.37% by someone who identified as African American or Black.
Overall, households headed by Hispanics and
African Americans were underrepresented in the top two quintiles and overrepresented
in the bottom two quintiles. Households headed by people who identified
as being Asian alone were also overrepresented among the top two quintiles. In the top five percent the percentage of
Asians was nearly twice as high as the percentage of Asians among the general population. Whites were relatively even distributed throughout
the quintiles only being underrepresented in the lowest quintile and slightly overrepresented
in the top quintile and the top five percent.In terms of race in 2010 data, Asian American
households had the highest median household income of $57,518, European-American households
ranked second with $48,977, Hispanic or Latino households ranked third with $34,241. African-American or Black households had the
lowest median household income of all races with $30,134. Source: US Census Bureau, 2004 === Education and gender === Household income as well as per capita income
in the United States rise significantly as the educational attainment increases.
In 2005 graduates with a Master's in Business
Administration (MBA) who accepted job offers were expected to earn a base salary of $88,626. They were also expected to receive an "average
signing bonus of $17,428."According to the US Census Bureau persons with doctorates in
the United States had an average income of roughly $81,400. The average for an advanced degree was $72,824,
with men averaging $90,761 and women averaging $50,756 annually. Year-round full-time workers with a professional
degree had an average income of $109,600 while those with a master's degree had an average
income of $62,300. Overall, "…[a]verage earnings ranged from
$18,900 for high school dropouts to $25,900 for high school graduates, $45,400 for college
graduates and $99,300 for workers with professional degrees (M.D., D.P.T., D.P.M., D.O., J.D.,
Pharm.D., D.D.S., or D.V.M.).Individuals with graduate degrees have an average per capita
income exceeding the median household income of married couple families among the general
population ($63,813 annually).
Higher educational attainment did not, however,
help close the income gap between the genders as the life-time earnings for a male with
a professional degree were roughly forty percent (39.59%) higher than those of a female with
a professional degree. The lifetime earnings gap between males and
females was the smallest for those individuals holding an associate degrees with male life-time
earnings being 27.78% higher than those of females. While educational attainment did not help
reduce the income inequality between men and women, it did increase the earnings potential
of individuals of both sexes, enabling many households with one or more graduate degree
householders to enter the top household income quintile. These data were not adjusted for preferential
differences among men and women whom attend college. For example, men often study fields of engineering
while women often pursue social sciences. Household income also increased significantly
with the educational attainment of the householder. The US Census Bureau publishes educational
attainment and income data for all households with a householder who was aged twenty-five
or older.
The biggest income difference was between
those with some college education and those who had a Bachelor's degree, with the latter
making $23,874 more annually. Income also increased substantially with increased
post-secondary education. While the median annual household income for
a household with a householder having an associate degree was $51,970, the median annual household
income for householders with a bachelor's degree or higher was $73,446.
Those with doctorates had the second highest
median household with a median of $96,830; $18,289 more than that for those at the master's
degree level, but $3,170 lower than the median for households with a professional degree
holding householder. Source: US Census Bureau, 2003 The change in median personal and household
since 1991 also varied greatly with educational attainment. The following table shows the median household
income according to the educational attainment of the householder. All data is in 2003 dollars and only applies
to householders whose householder is aged twenty-five or older. The highest and lowest points of the median
household income are presented in bold face. Since 2003, median income has continued to
rise for the nation as a whole, with the biggest gains going to those with associate degrees,
bachelor's degree or more, and master's degrees.
High-school dropouts fared worse with negative
growth. Source: US Census Bureau, 2003 === Age of householder === Household income in the United States varies
substantially with the age of the person who heads the household. Overall, the median household income increased
with the age of householder until retirement age when household income started to decline. The highest median household income was found
among households headed by working baby-boomers.Households headed by persons between the ages of 45 and
54 had a median household income of $61,111 and a mean household income of $77,634. The median income per member of household
for this particular group was $27,924. The highest median income per member of household
was among those between the ages of 54 and 64 with $30,544 [The reason this figure is
lower than the next group is because pensions and Social Security add to income while a
portion of older individuals also have work-related income.].The group with the second highest
median household income, were households headed by persons between the ages 35 and 44 with
a median income of $56,785, followed by those in the age group between 55 and 64 with $50,400.
Not surprisingly the lowest income group was
composed of those households headed by individuals younger than 24, followed by those headed
by persons over the age of 75. Overall, households headed by persons above
the age of seventy-five had a median household income of $20,467 with the median household
income per member of household being $18,645. These figures support the general assumption
that median household income as well as the median income per member of household peaked
among those households headed by middle aged persons, increasing with the age of the householder
and the size of the household until the householder reaches the age of 64.
With retirement income replacing salaries
and the size of the household declining, the median household income decreases as well. === Household size ===
While median household income has a tendency to increase up to four persons per household,
it declines for households beyond four persons. For example, in the state of Alabama in 2004,
two-person households had a median income of $39,755, with $48,957 for three-person
households, $54,338 for four-person households, $50,905 for five-person households, $45,435
for six-person households, with seven-or-more-person households having the second lowest median
income of only $42,471. === Geography ===
Considering other racial and geographical differences in regards to household income,
it should come as no surprise that the median household income varies with race, size of
household and geography. The state with the highest median household
income in the United States as of the US Census Bureau 2009 is Maryland with $69,272, followed
by New Jersey, Connecticut and Alaska, making the Northeastern United States the wealthiest
area by income in the entire country.Regionally, in 2010, the Northeast reached a median income
of $53,283, the West, $53,142, the South, $45,492, and the Midwest, $48,445.
Each figure represents a decline from the
previous year. ==== Income by state ====
In 2010, the median household income by state ranged from $35,693 in Mississippi to $66,334
in Maryland. Despite having the highest median home price
in the nation and home prices that far outpaced incomes, California ranked only ninth in income,
with a median household income of $61,021. While California's median income was not near
enough to afford the average California home or even a starter home, West Virginia, which
had one of the nation's lowest median household incomes, also had the nation's lowest median
home price.By Census Bureau Region, of the 15 states with the highest median household
income, only Minnesota is located in the Mid-West, while eight are in the Northeast (New Jersey,
Connecticut, Massachusetts, New Hampshire, Maryland, Delaware, Virginia, and New York)
and the other six (Alaska, Hawaii, California, Washington, Colorado and Utah) are in the
West.
The southern states had, on average, the lowest
median household income, with nine of the country's fifteen poorest states located in
the South. However, most of the poverty in the South
is located in rural areas. Metropolitan areas such as Atlanta, Nashville,
Charlotte, Raleigh, Birmingham, Dallas, Houston, and Miami are areas within the southern states
that have above average income levels. Overall, median household income tended to
be the highest in the nation's most urbanized northeastern, upper midwestern and west coast
states, while rural areas, mostly in the southern and mountain states (like New Mexico, Montana
and Idaho), had the lowest median household income.As of 2015, the median household income
ranged from $40,037 in Mississippi to $76,805 in Maryland. The median personal income per person, after
adjusting for costs of living with local regional price parities and the national PCE price
index, averaged $47,807 in 2016 (in 2012 chained dollars). Median adjusted personal income per capita
varied from $39,901 in Mississippi to $61,601 in Connecticut (and $64,363 in the District
of Columbia). The states closest to the national average
were California and Vermont, at $48,384 and $47,971 respectively.
== Social class == Household income is one of the most commonly
used measures of income and, therefore, also one of the most prominent indicators of social
class. Household income and education do not, however,
always reflect perceived class status correctly. Sociologist Dennis Gilbert acknowledges that
"… the class structure… does not exactly match the distribution of
household income" with "the mismatch [being] greatest in the middle…" (Gilbert, 1998: 92) As social classes commonly
overlap, it is not possible to define exact class boundaries. According to Leonard Beeghley a household
income of roughly $95,000 would be typical of a dual-earner middle class household while
$60,000 would be typical of a dual-earner working class household and $18,000 typical
for an impoverished household.
William Thompson and Joseph Hickey see common
incomes for the upper class as those exceeding $500,000 with upper middle class incomes ranging
from the high 5-figures to most commonly in excess of $100,000. They claim the lower middle class ranges from
$35,000 to $75,000; $16,000 to $30,000 for the working class and less than $2,000 for
the lower class. == Distribution of household income == ===
Distribution of household income in 2014 according to US Census data === ==
See also == List of countries by average wage
Income inequality in the United States Economy of the United StatesGeneral: Income inequality metrics
Atkinson index Gini coefficient
Hoover index Theil index
International Ranking of Household Income Marriage gap
Median income per household member == References == == External links ==
Income, Poverty, and Health Insurance Coverage in the United States: 2003
Reynolds, Alan (January 8, 2007).
"Has U.S. Income Inequality Really Increased?". Policy Analysis. Cato Institute (586). U.S. Census Bureau's web-site for income statistics
NPR.org statistics and background on income inequality in the United States
Datasets by U.S. State of low income, very low income, extremely low income limits.