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The Household income in the United States is a measure of current private income commonly used by the United States government and private institutions. To measure the income of a household, the before tax income of all residents over the age of 15 is added together. Most of this is wages and salaries (before withholding and other taxes), but many other forms of income, such as unemployment insurance, disability, child support, etc., are included as well. The people in the household do not have to be related to the householder for their income to be considered part of the household's income.[1] Household income is among the most widely accepted measures as households tend to share a common economic fate. The size of a household which is commonly not considered may off-set gains in household income.[2]
In 2005, the median annual household income according to the US Census Bureau was $46,326,[3] similar to that of Canada which was roughly $41,510 (USD) in the year 2000.[4] The median income per household member (including all working and non-working members above the age of 14) in the year 2003 was $23,535.[5] In the year 2005, there were about 113,146,000 households in the United States. 17.23% of all households had annual incomes more than $100,000.[6] 12.7% fell below the federal poverty threshold.[7] The bottom 20% earned less than $19,178.[8] The income distribution tends to tilt towards the top with the top 6.37% earning roughly one third of all income. Those with upper-middle incomes also controlled a large, though declining, share of the total earned income.[2][9] Households in the top 20%, 77% of which had two income earners, had incomes exceeding $91,705. Households in the mid 20%, with a mean of one income earner per household had incomes between $36,000 and 57,657.[8]
The 2005 economic survey also found that households in the top 40%, those with an annual household income exceeding $55,331, had a median of two income earners while those in the lower quintiles (2nd and middle quintile) had median of only one income earner per household. Due to high unemployment among those in the lowest quintile the median number of income earners for this particular group was zero.[10] Overall the United States followed the trend of other developed nations with a relatively large population of relatively rich households outnumbering the poor. There was large and quite powerful section of households with moderately high middle class incomes[9] and an even larger number of households with moderately low incomes.[6] While the median household income has increased 44% since 1990 it has decreased very slightly when considering inflation. In 1990, the median household income was $30,056; $44,603 in 2003 dollars. While personal income has not changed much over the past few decades, household income has risen because more households have two or more income earners. Between 1999 and 2004 household income showed only a slight increase since 2004.[11][12]
Households are often divided into quintiles according to their gross income. Each quintile represents 20%, or one fifth, of the population.
Household type is strongly correlated with household income. There are more married couples in the upper two quintiles, compared to the general population of households. This is likely due to the presence of more than one income earners in these families. Non-family households (individuals) are disproportionately represented in the lower two quintiles. Households headed by single males are disproportionately found in the middle three quintiles; single females head households concentrated in the bottom three quintiles.
The highest income households are almost ten times as likely to own their homes rather than rent, but in the lowest quintile, the ratio of owners to renters is nearly one to one.
Despite great advances made to lift minorities out of poverty and many African Americans and Latino Americans joining the middle class, there is still an uneven racial distribution among the groups. White people who were not of Hispanic descent made up roughly 75.1% of all persons in 2000,[15] 87.93% of all households in the top 5% were headed by a person who identified as being White. Only 4.75% of all household in the top 5% were headed by someone who identified him or herself as being Hispanic or Latino of any race,[16] versus 12.5% of persons identifying themselves as Hispanic or Latino in the general population.[15] Overall 86.01% of all households in the top two quintiles with upper-middle range incomes of over $55,331 were headed by a head of household who identified him or herself as White, while only 7.21% were being headed by someone who identified as being Hispanic and 7.37% by someone who identified as being African American or Black.[16] Overall households headed by Hispanics and African Americans or Blacks were underrepresented in the top two quintiles and overrepresented in the bottom two quintiles. Households headed by people who identified as being Asian were 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. European Americans 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.[16]
Household income as well as per capita income in the United States rises significantly as the educational attainment increases.[17] In 2005 graduates with a Master's in Business Administration (MBA) who accepted job offers are expected to earn a base salary of $88,626. They are also expected to receive "…[a]n average signing bonus of $17,428."[18] 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.O., J.D., D.D.S., or D.V.M.).[19]
Considering how education increases the earnings of individuals, it should come as no surprise that 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).[19][20] Higher educational attainment did not, however, help close the income gap between the genders as the life-time earnings for a male with a professionals degree were roughly forty percent (39.59%) higher than those of a female with a professionals degree. The life-time earnings gap between males and females was the smallest for those individuals holding an associate degree with male life-time earnings being 27.77% 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.[19]
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. Income also increased substantially with increased post-secondary education. While the median household income for a household with a household holding an associate degree was $51,970, the median household income for those 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 higher than that for those at the Master's degree level, but $3,170 lower than the median for households with a professionals degree holding householder.[21]
The change in median personal and household income since 1991 also varied greatly with educational attainment. While, both the overall median personal and household income increased since 1991, this increase did not take place on all levels of educational attainment. The overall income increased over the course of the 1990s, reaching its high in 1999, but decreasing since. In 1991 the median household income in the US was $40,873 in 2003 dollars, while the median household income in 2003 was $45,016. In 1999 the median household income was $46,236, 2.7% higher than today. The median household income decreased for households and individuals at the high school drop-outs and graduate, some-college, and an Associates degree level. Income did, however, increase for those with a Bachelor's degree or more. 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.[21][22]
Household income in the United States varies a lot with the age of the person who heads the household. The median household income increased with the age of householder until retirement age when household income started to decline.[23] The highest median household income was found among households headed by working baby-boomers.[23] 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 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 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. The lowest income group was mainly those households headed by individuals younger than 24, followed by those headed by persons over the age of 75. 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.[23]
Household income over time
Please note that all figures are presented in 2003 dollars.
Since 1967, the median household income in the United States has risen modestly, fluctuating several times. Even though personal income has risen substantially and 42% of all household now have two income earners, the median household income has increased only slightly. According to the US Census Bureau, this is due to the changing structure of American households. The proportion of wives working year-round in married couple households with children increased from 17% in 1967 to 39% in 1996, the proportion of such households among the general population has decreased. While married couple households with children are the most economically prosperous type of household in the United States, their share of the population has gone down. In 1969, more than 40% of all households consisted of a married couple with children. By 1996 only about quarter of US households were married couples with children. As a result of these changing household demographics, median household income rose only slightly despite an ever increasing female labor force and a considerable increase in the percentage of college graduates.[24]
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"From 1969 to 1996, median household income rose a very modest 6.3 percent in constant dollars... The 1969 to 1996 stagnation in median household income may, in fact, be largely a reflection of changes in the size and composition of households rather than a reflection of a stagnating economy."- John McNeil, US Census Bureau
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The median household income rose from $33,338 in 1967 to an all-time high of $44,922 in 1999, and has since fallen slightly to $43,318. Decreases in household income are visible during each recession, while increases are visible during economic upturns. The incomes of both, the 95th and 20th percentile were affected by fluctuations in the economy. Income in the period between 1967 and 1999 grew faster among wealthier households than it did among poorer households. The household income for the 80th percentile, the lower threshold for the top quintile, rose from $55,265 in 1967 to $86,867 in 2003, a 57.2% increase. The median household income rose by 30% while the income for the 20th percentile (the lower threshold for the second lowest quintile) rose by only 28% from $14,002 to $17,984. The majority of households in the top quintile had two income earners, versus zero for the lowest quintile and that the widening gap between the top and lowest quintile may largely be the reflection of changing household demographics including the addition of women to the workforce.[24][25]
While per-capita, disposable income has increased 469% since 1972 it has only increased moderately when considering inflation. In 1972, disposable personal income was $4,129; $19,385 in 2005 dollars. In 2005, disposable personal income was $27,640, showing a moderate 43% increase.[26][27] Since 1990, household income has fallen slightly, but this does not take into account the decrease in average household size.[28]
The median household income by state ranged from $32,589 or 26.7% below national median, in West Virginia to $57,352 or 29% above national median, in New Hampshire. Connecticut, which is often referred to as the nation's wealthiest state,[29] came in at number four with a median household income of $55,970. California which had the highest median home price in the nation.[30] where home prices have far outpaced incomes[31] only ranked number thirteen with a median household income of $49,894.[32] While California's median income was not near enough to afford the average California home or even a starter home, West Virginia, which had the nation's lowest median household income also had the nation's lowest median home price.[30][32] The northeastern states, more specifically those in New England, as well as the western states had the highest median household income. Of the top fifteen states, all were in the Northeast and West, with the sole exception of Minnesota which ranked fifth. The southern states had the by far lowest median household income with nine out of the country's fifteen poorest states being located in the South. New York, Pennsylvania and the District of Columbia also fell below the national median. Overall, median household income tended to be the highest in nation's most urbanized northeastern, north mid-western and western States, while rural and mostly southern states had the lowest median household income.[32]
The median income divides households in the US evenly in the middle with half of all household earning more than the median income and half of all households earning less than the median household income. In 2004 the median household income in the United States was $43,389.[20] According to the US Census Bureau, the median is "considerably lower than the average, and provides a more accurate representation."[33] The median household income varies with race, size of household and geography. The state with the highest median household income in the United States was New Hampshire with $57,352, followed by New Jersey, Maryland and Connecticut, making the Northeastern United States the wealthiest area by income in the entire country.[34] In terms of region the median household income was as follows: "Northeast ($47,994), West ($47,680) and South ($40,773)." Median household income in the Mid-West declined by 2.8% to $44,657.[35] The exception was the Midwest, where income declined 2.8% to $44,657. While median household income has tendency to increase up to four persons per household, it declines thereon after. This indicated that while four person households have larger incomes than those with one, two or three members, household with seem to earn progressively less as their size increases beyond four persons. According to the US Census Bureau 2004 Community Survey, 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.[36] In terms of race, Asian-Americans 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.[35]
Mean 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.[37] The mean income is usually more affected by the relatively unequal distribution of income which tilts towards the top.[33] As a result, the mean tends to be higher as 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 2004 Economic Survey was $60,528, or $17,210 (39.73%) higher than the median household income.[38]
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"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."[37] -US Census Bureau, Frequently Asked Question, published by First Gov.
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The mean household income for households headed by persons identifying as White alone was $65,317, $40,685 for those headed by persons identifying as African American or Black, $45,871 for those headed by persons identifying as Hispanic or Latino, and $76,747 for those households headed by persons identifying as Asian alone. Approximately one third, or 36.5%, of all households earned more than the mean income, while 63.5% earned less than the mean.[38]
