Economists like to look at changes in the gross domestic product (GDP) when assessing the health of the economy. But for a real-life glimpse of how well individual Americans are doing, you need to know what their income is. We can find out what the U.S. citizen's average income is with the U.S. Census Bureau's data, which is collected annually.
- The median income for U.S. households in 2020 was $67,521 in 2020, a decrease of 2.9% from the previous year.
- This was the first statistically significant decline in U.S. median household income since 2011.
- The median income for 2020 was down largely due to the effects of the COVID-19 pandemic.
- The official poverty rate in 2020 was 11.4%, up 1.0 percentage point from 10.5 percent in 2019.
What Is Median Income?
Median income means that half of the people earn less than that figure and half earn more. It's actually a more accurate assessment of how well Americans are doing than using the average. With average income, a small number of people with very high salaries—i.e., America's billionaire class, for example—could skew the figures so they look better than they really are.
In 2020, U.S. median income declined for the first time in more than a decade, largely due to the effects of the global COVID-19 pandemic. The median household income in 2020 (the latest year for which official data is available) was $67,251, which is a 2.9% decrease from 2019.
Why Median Household Income Was Down
This was the first time since the Great Recession, when left millions of Americans without work, that median U.S. income saw a decline in median income. Experts see this as largely a response to the COVID-19 pandemic that first struck in early 2020. Lockdowns, business closures, a reduction in travel, and layoffs all contributed.
Because the U.S. government passed a series of stimulus measures including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA Act), household income did not drop as much as it could have.
What’s more, there are clues that income loss disproportionately affected lower-wage earners. Of particular note is the fact that the poverty rate rose to 11.4%, up 1.0 percentage point from 10.5% in 2019. This marked the first increase in poverty after five consecutive annual declines.
Regional Disparities in Average Income
While it can be informative to look at nationwide income figures, taking a closer look at the data yields some interesting discoveries. Among them is a deep chasm between affluent and poor parts of the country.
The Northeast is the most affluent part of the U.S., where the median household income was $75,211. Moreover, this was the only region where a decline in household income was not observed. Median income decreased 3.2% from 2019-2020 in the Midwest and 2.3% in both the South and the West. Americans in the South earned the lowest median income, at $61,243.
Gender and Racial Pay Gaps
The figures show a continued gender gap in terms of pay, with women earning substantially less than men in 2020. Females who worked full time earned a median income of $50,982, according to the census data. That’s roughly 80% of what their male counterparts made: $61,417.
There’s also a significant income divide among racial groups. The median yearly income for white non-Hispanic households was $74,912. However, Black Americans earned a median income of just $45,870, and Hispanics $55,321. The highest earners of all were Americans of Asian descent, at $94,903 per year.
Why Is a Country's Average Income Often Higher than Its Median Income?
Average income sums up all incomes observed in the country and divides them by the number of people earning those incomes. Because there are often a very small number of very wealthy individuals with very high incomes (e.g. the top 1%), it will distort the average by skewing it upward. A better representation is the median, whereby 50% of incomes appear below the median and 50% above it. This eliminates that upward bias.
What's the State With the Highest Median Income?
As of 2020, the U.S. state with the highest median income is Maryland, at $93,384.
What's the State With the Lowest Median Income?
The lowest-earning state by median income was Mississippi, at $44,966.
The Bottom Line
Census figures across the board show that wages are on the rise—a sign that the economic recovery is starting to benefit Middle America. While that’s good news for workers in the U.S., it’s clear that large gulfs continue to exist between genders and races.