“Average income” is a term many people use to describe middle income, or how much money someone in the middle earns earns each year. Median income is a more accurate reflection of the income of middle-income earners than median income because the number of high-income earners affects the median income level. The U.S. Census Bureau reports the U.S. average and median income for September each year.
In 2020, the median household income was $97,026. The median household income—the more commonly cited figure—was $67,521.
Average income in 2020
Median household income fell from $69,560 in 2019 to $67,521 in 2020. Median household income has been rising steadily since 2010, so this is the most significant decline since then.
The government uses median household income to report poverty lines for statistical purposes. It also uses the numbers to determine the poverty line and thus eligibility for health subsidies and benefit programs.
Type of average
The U.S. Census Bureau uses two different methods to report income. Let’s take a look at these guys.
Mean and median
The average is similar to the average — it adds up all income and divides it by the number of people reported. Median income is taken from a list of reported income and represents the median of numbers—the point where half earns more and half earns less. As a simple example, let’s say five people do the following during a week:
Joe: $1,050
Jane: $2,050
Joan: $3,050
Chris: $4,050
Christie: $6,500
Joan’s weekly income of $3,050 is the median income for the group because it is the median. The median (average) income for this group was $3,340. Slightly higher because Christie earns a lot more in a week than everyone else.
At the national level, the average income is often much higher than the median because income disparities are so large. If the average is used to represent income levels, it will give an inaccurate estimate because it is affected by income inequality in the United States. For this reason, most reports use the median income, but call it the average.
Real and nominal
Note whether real or nominal income is reported. Real income removes the effects of inflation. In order to compare income levels over time, actual income must be used. Nominal income ignores the changing cost of living, which in turn gives an inaccurate picture of income.
Who does the Census provide median income for?
The Census Bureau reports median income for three different groups:
- Income per capita refers to the income of each person aged 15 and over. It is better known as “income per capita”.
- Household income is the average income of households with two or more relatives living in a household. They can be linked by birth, marriage or adoption.
- Household income is the average income of all persons living in a dwelling unit. Whether they live alone, with family, or with a group of unrelated people, such as friends or roommates.
The census also breaks down income by age, relationship to household, race, education and type of residence.
How has the average income changed in 2020?
U.S. household income rose significantly in 2019 and declined in 2020. This equates to a 2.9% drop in the median household real income. Median household income increased from $65,127 in 2018 to $69,560 in 2019, before falling to $67,521 in 2020.1
Median household income
The real median household income fell 3.4% to $84,088 in 2020 from $87,085 in 2019. 5 Household includes related members of the household.
As expected, the median household income was much higher at $114,962. However, this was down 2.7% from $118,192 in 2019.
Personal
Income levels of individuals have also declined:
The median real income per capita in 2020 is $35,805. This is 1.7% lower than the 2019 revenue of $36,426.7
- As expected, the median per capita income (on average) was $53,996. This is down 0.25% from $54,129.8 in 2019
Median U.S. Income: 2000-2020 - The table below compares the change in U.S. median income between 2000 and 2020. It also shows economic growth and unemployment over the years.
After the 2001 recession, incomes did not improve until 2005. The economy grew, but that didn’t translate into higher incomes. Many jobs have been replaced by technology or moved abroad.
Income did not recover after the crisis because many of the jobs created before the recession were in financial services and construction. These jobs did not return in 2009.10, but were in low-wage industries such as retail and hospitality. Also, many employers hire temporary workers or freelancers instead of offering full-time positions.
In 2010, Congress focused on reducing debt rather than creating jobs. As the chart below shows, as people retire, unemployment falls, but incomes don’t rise.
In 2013, incomes began to improve as unemployment fell. In 2016, median income finally surpassed its pre-recession peak. The economy improved steadily in 2019, declined in 2020, and then recovered in 2021.
U.S. federal poverty line
The U.S. government uses average household income statistics to represent the federal poverty line. With higher median incomes, the number and percentage of people living below the threshold declined.
In 2020, 37.2 million Americans live in poverty, an increase of 3.3 million from 2019. The figure raised the share of people living in poverty to 11.4% from a record low of 10.5% in February 2019
Final result
The median U.S. income — the median, not the average — is the average American. This is a broad measure of how much can be spent. This matters because consumer spending drives 70% of the economy. 13
When consumers make more money, they can spend more. More pocket money stimulates economic growth, which can lead to higher wages.
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