What Is the Average Income in the United States?
Income by Family and Household
Average income is any statistic that describes how much money an individual, family, or household makes. The U.S. Census Bureau reports average U.S. incomes in September of each year.
In 2019, incomes were on the rise, which they have been since 2012. Unfortunately, the pandemic made it more difficult to collect data from low-income people. This artificially inflated the average income and also made it seem like there was a huge drop in people living in poverty.
Nevertheless, income has reached record levels. People are making more than even before the 2008 recession. Unfortunately, this will probably change dramatically for 2020. The COVID-19 pandemic has caused record levels of unemployment, most likely leading to lower incomes for 2020 and possibly even beyond.
Average Income in 2019
The median household income was $68,703 in 2019, setting a new record. It was 6.8% higher than the 2018 record of $64,324. The median household income has been steadily rising since it was $58,001 in 2014.
The Census Bureau also reports the median income for each family. In 2019, it was $86,011. That's 7.4% higher than the $80,071 earned in 2018. It has been rising since 2012.
The government uses average family income for statistical purposes, such as reporting the poverty threshold. It also uses it to establish the poverty levels that determine eligibility for Obamacare subsidies and welfare programs.
- Measuring the U.S. income levels helps establish poverty standards
- Median and real values of income more accurately represent how much U.S. residents earn
- The most effective way to increase income is through higher education
- Middle and lower class wages are not increasing as quickly as those of upper-class workers
Types of Averages
The U.S. Census, and therefore the news media, reports many different types of income averages. Here's a look at those types.
Mean and Median
The Census reports two kinds of averages.
- The mean sums up all incomes and divides by the number of people reporting.
- The median income is the point where half the people make more and half make less.
The mean income is usually higher than the median because the few people who make enormous amounts of money skew the results higher. They outweigh the many who make low incomes. That gives an inaccurate estimate because it's affected by the income inequality in the United States. For this reason, most reports use the median income.
When looking at average income, pay attention to what it measures specifically. Determine whether it's the mean or median, and then find out whether it's per capita, family, or household. Also, check whether it's real (adjusted for inflation) or nominal.
Real and Nominal
Pay attention to whether real or nominal income is being reported. Real income removes the effects of inflation. To compare income levels over time, you must use real income. Nominal income ignores the changing cost of living.
Who Does the Census Report Average Income For?
The Census reports average income for three different groups:
- The income per person is the income for each person at age 15 or older. It's more commonly known as income per capita.
- Family income is average for a family of two or more related people living in a household. They can be related by birth, marriage, or adoption.
- Household income is the average income of all people living in a housing unit. It doesn't matter if they are living alone, with a family, or with a group of unrelated individuals.
The Census also break out income by age, relationship to the household, race, education, and type of housing.
How Did Average Income Change in 2019?
No matter how it's measured, American income rose substantially in 2019. Years of a steady growth rate and a low unemployment rate led to a 6.8% increase in real median household income. It rose from $64,324 in 2018 to $68,703 in 2019.
The COVID-19 pandemic affected the survey. Low-income households were less likely to respond, artificially boosting average incomes. The Census estimated that after adjusting for nonresponse bias, the 2019 real median household income was $66,790, 2.8% lower than the reported $68,703 estimate.
For families, real median income rose 7.4%, from $80,071 in 2018 to $86,011 in 2019. This has been on the rise since 2014. Families include related members in a household.
As expected, the mean family income was much higher, at $116,735. That's an 8.1% increase over the income of $107,966 in 2018. Mean family income has been rising since about 2012.
Remember, the U.S. mean income will always be higher than the median income. The mean is skewed by a small number of very wealthy families, households, and individuals.
Income levels for individuals also increased.
- The 2019 nominal median income per capita was $35,977. That's 4.8% higher than the 2018 income of $34,317.
- As expected, the median was lower than the mean income per capita which was $54,129. That's 7.4% higher than 2018's level of $50,413.
U.S. Average Income: 2000 to 2019
The table below compares the change in income between 2000 and 2019. It also shows economic growth and unemployment for those years.
After the 2001 recession, incomes didn't improve until 2005. The economy grew, but it didn't translate to higher incomes. Many jobs were replaced by technology or moved overseas.
The 2008 financial crisis sent incomes plummeting. They didn't improve until 2013.
One reason incomes didn't recover after the crisis is that many of the jobs created before the recession were in financial services and construction. Those jobs did not return in 2009. Instead, jobs were in low-paying areas such as retail and food services. Many employers hired temporary or freelance workers instead of offering full-time positions.
In 2010, Congress focused on reducing the debt instead of creating jobs. As the chart below shows, the unemployment rate fell as people dropped out of the labor force, but incomes did not rise.
In 2013, income began to improve as unemployment fell. In 2016, average income finally exceeded the pre-recession peak. The economy steadily improved through 2019. It created a Goldilocks economy where inflation is low and growth is moderate.
Note: The percentage change for 2017 is not applicable because the Census changed the questionnaire.
U.S. Federal Poverty Threshold
The government uses average family income statistics to reporting the federal poverty threshold. Since average income was higher, the number and percent of those living below the threshold dropped.
In 2019, the poverty threshold was $25,926 for a family of four.
In 2019, there were 34 million Americans living in poverty. That's 4.2 million fewer than in 2018. This lowered the percentage of people living in poverty to 10.5%, a record low. That's down from 14.8% in 2014.
The COVID pandemic affected the poverty level since low-income households were less likely to respond. The estimated that, without the bias, the poverty level would have been 11.1% in 2019.
The Bottom Line
The U.S. average income indicates how much money Americans are earning. It's a broad measurement of how much is available to spend. That's important since consumer spending drives 70% of the economy. If incomes drop, the economy slows. If incomes rise, then growth surges ahead.