Household income is an economic standard that can be applied to one household or aggregated across a large group such as a county, city, or the whole country. A key measure of household income is the median income, at which half of households have income above that level and half below. Household income is also used to determine the poverty line in the United States.
The median household income depicts the income of households, including the income of the householder and all other individuals aged 15 years or over living in the household. Income includes wages and salaries, unemployment insurance, disability payments, child support payments received, regular rental receipts, as well as any personal business, investment, or other kinds of income received routinely. As households tend to share a similar economic context, the use of household income remains among the most widely accepted measures of income.
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.
A look at factors affecting the Kenyan economy
Key Measures of Income and Wealth
Government surveys collect a wide range of information about the population of the United States that contain useful insights about Americans’ economic status. Below are several measures of income and wealth from those three surveys.
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.
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Census Bureau reports two median household income estimates based on data from two surveys: the Current Population Survey (CPS) Annual Social and Economic Supplement and the American Community Survey (ACS). 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. 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.
Aggregate Income
The aggregate income measures the combined income earned by all persons in a particular income group. In 2018, the total personal income earned in the United States was $17.6 trillion. In 2008, all households in the United States earned roughly $12,442.2 billion.
Factors Influencing Household Income
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. The nonpartisan Congressional Budget Office conducted a study analyzing household income throughout the income distribution, by combining the Census and IRS income data sources.
Between 1979 and 2011, gross median household income, adjusted for inflation, rose from $59,400 to $75,200, or 26.5%. 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.
Real wages (i.e. economic growth was not translating into higher median family incomes. 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. 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.
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Household Income and Education
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. 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. 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 27.77% higher than those of females.
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. The change in median personal and household since 1991 also varied greatly with educational attainment. 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.
Median Household Income by Educational Attainment of Householder (2003 Dollars)
| Educational Attainment | Median Household Income |
|---|---|
| Less than 9th Grade | $22,024 |
| 9th to 12th Grade, No Diploma | $27,785 |
| High School Graduate | $40,488 |
| Some College, No Degree | $46,163 |
| Associate Degree | $51,970 |
| Bachelor's Degree or Higher | $73,446 |
Household income in the United States varies substantially with the age of the person who heads the household. 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.
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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.
While median household income has a tendency to increase up to four persons per household, it declines for households beyond four persons. 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.
In 2007, the median household income by state ranged from $36,338 in Mississippi to $68,080 in Maryland. Despite having the highest median home price in the nation[54] and home prices that far outpaced incomes, California ranked only eighth in income that year, with a median household income of $59,984. When grouped by Census Bureau Region, of the 15 states that, in 2017, had the highest median household income, only Minnesota is located in the Mid-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. As of 2019, the median household income ranged from $20,474 in Puerto Rico to $92,266 in the District of Columbia.
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.
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.
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