Every September, the U.S. Census Bureau releases data on the mean and median incomes in the country. Many refer to median income, or how much money those in the middle of the income scale make annually, as "average income." Due to the skewing effect of high earners on average income, the median income is a better indicator of middle-class income than average income. The typical household income in 2020 was $97,026. The more usually mentioned figure, the median household income, was $67,521.
Key Takeaways
- Setting poverty standards is aided by measuring American income levels.
- The median and real income statistics more properly reflect the income levels of Americans.
- The rising mean (average) income indicates that wages for middle- and lower-class workers are not rising as swiftly as those for upper-class people.
- The wealth divide between the high and lower classes is widening.
Average Income in 2020
The median family income decreased from $69,560 in 2019 to $67,521 in 2020. This was the biggest decline in median family income since 2010 when it had been climbing rapidly. The government calculates the poverty line using the average household income for statistical purposes. These numbers also establish the thresholds of poverty that govern eligibility for assistance and healthcare subsidies.Types of Averages
The U.S. Census Bureau reports income in two separate ways. Here are those sorts in further detail.Mean and Median
The mean is comparable to an average in that it adds all reported incomes and divides by the total number of participants. The median income—the amount at which half of the population makes more money than the other half—is calculated from a list of reported incomes. Consider five people producing the following in one week as a simplified example:- Joe: $1,050
- Jane: $2,050
- Joan: $3,050
- Chris: $4,050
- Christy: $6,500
Real and Nominal
Keep an eye out for the reporting of real or nominal income. Real income must be used to compare income levels over time. Inflation's impacts are eliminated by real income. Nominal income, which again presents an erroneous picture of income, overlooks the fluctuating cost of living.Whom Does the Census Report Average Income For?
The Census Bureau reports average incomes for three different groups:- Everyone over the age of 15 is included in the income per person calculation. It is more frequently referred to as "income per capita."
- The average family income refers to a group of two or more related persons living together. By birth, marriage, or adoption, they may be linked.
- The average income of everyone residing in a housing unit is the household income. It makes no difference if they live alone, with a family, or with a group of people who are not related to them, such as friends or roommates.
How Did Average Income Change in 2020?
2019 saw a significant increase in American household income, which then declined in 2020. The median income for households increased from $65,127 in 2018 to $69,560 in 2019, falling to $67,521 in 2020. Real median household income has decreased by 2.9 percent as a result.Family Median Income
Families' real median income decreased by 3.4 percent from $87,085 in 2019 to $84,088 in 2020. 5 Families are made up of people from the same home. The median family income, at $114,962, was far greater than anticipated. But compared to the 2019 level of $118,192, this decreased by 2.7 percent. The mean income in the United States is always greater than the median income. Small numbers of extremely wealthy families, households, and individuals skew the mean.Individuals
Income levels for individuals also decreased:- Real median personal income in 2020 was $35,805 per person. The 2019 income of $36,426 is lower by 1.7 percent.
- The mean (average) per-capita income was $53,996, as anticipated. This is.25% less than the 2019 level of $54,129.
U.S. Average Income: 2000 to 2020
The change in the average income in the U.S. between 2000 and 2020 is compared in the table below. It also displays the unemployment rate and economic growth for those years. Incomes didn't start to rise again after the recession of 2001 until 2005. Although the economy expanded, there was no associated increase in income. Technology has eliminated much employment, or they have been offshored. Incomes plunged as a result of the 2008 financial crisis. On average, they didn't get better until 2013. Because much of the employment created before the recession was in the financial services and construction industries, incomes did not recover following the crisis. In 2009, such jobs did not resurface. Instead, the positions were in low-paying retail and the food industry. In addition, many firms recruited temporary or independent contractors rather than offering full-time employees. Instead of emphasizing job creation in 2010, Congress concentrated on debt reduction. As more people left the workforce, the unemployment rate decreased, but incomes did not increase, as shown in the chart below. As unemployment decreased in 2013, income started to rise. The average income ultimately surpassed the pre-recession high in 2016. The economy grew smoothly through 2019, declining in 2020 and rebounding in 2021.Real Median Household Income, Economic Growth, and Unemployment
Because the Census revised the questionnaire, the percentage change for 2017 is irrelevant.U.S. Federal Poverty Threshold
The federal poverty line is calculated using statistics on average family income. The number of people living below the poverty line and their percentage decreased as average income increased. The American poverty line in 2020 was $26,496 for a family of four. 37.2 million Americans were living in poverty in 2020, an increase of 3.3 million from the previous year. From a record low of 10.5 percent in 2019, this number increased the proportion of people living in poverty to 11.4 percent.The Bottom Line
The median income in the United States, not the mean, shows how much the average American makes. It's a general indicator of how much money is accessible for spending. Because consumer spending accounts for 70% of the economy, it is crucial. Consumers have more money to spend if they earn more. Spending more money encourages economic expansion, and economic expansion can result in better earnings.Frequently Asked Questions (FAQs)
What percentage of Americans earn more than that?
As of 2019, the top 1% of earners in the U.S. reported adjusted gross earnings of over $546,000 annually. That is a household income that is more than seven times the average.In 2022, what is a good income?
In the United States, the weekly median income in 2021 was around $1,298.50, or $67,521. The median income is adequate; however, whether an income is adequate or not depends on a person's situation, way of life, and aspirations.What is considered a high salary?
The upper class was defined by the Pew Research Center in 2016 as people with earnings over $135,600. The top class earns more than $165,460 in 2022 dollars if inflation is considered.