With the US average income depicting a increase in the past ten years, there are few aspects/issues and scenarios which are discussed below.
What Is Average Income?
While the heath of an economy is analyzed using Gross Domestic Product changes, real-life trends of how individuals have a living can be understood by studying what the U.S. citizen’s average income is. Data from the U.S. census bureau can be helpful for this.
Also Read: GDP Explained
Comparatively, median income provides a more accurate analysis of the economy than average income. Median income means that half of the people earn less than that figure and half earn more while average income calculation can be a mislead with a small number of people with high salaries increasing the average figure and making the picture look more rosy than what actually it is.
US Average Income – 10 Years Comparison
Ten years ago, Americans seemed to be struggling to find jobs and also experienced a dip in their investments. However, analysis of Bureau of Labor Statistics data showed that in 2019 despite wages remaining constant Americans between the age group of 25 and 54 are earning a marginal 4% (adjusted for inflation) more than they did in 2009.
Pew Research Centre data shows that today’s typical wages of $23.68 per hour rate have the same purchasing power as what it had with $4.03 per hour rate in January 1973. It says that wage gains have mostly been concentrated in the highest-paid tier of workers.
The stagnant wages makes life difficult for young people to reach financial milestones which ancestors have reached. With students graduating on loans, their other life goals like purchasing homes are all put on hold. Unison revealed that 83% of non-homeowners said student debt is the reason they can’t afford to buy a home right now.
Study reveals that over the past decade income growth has not shown any stark performance as it was expected. This is partially caused by unemployment rate staying around 4% or below in 2019. Employers have a higher skill set by using technology and consolidation in industries such as telecommunications and banking and thereby they hold back wages.
Current US Average Income Scenario
U.S. Census Bureau data from 2018 reveals the median household income was $63,179 compared to $61,372 in 2017. As per the data, one fifth of income earners with $130,001 or more contributed 52% of all the U.S. income in 2018.
President Donald Trump pointed out that employment is the best way out of poverty and he made policies which have made labor market a better place than it ever was in history.
The latest number of full-time, year-round workers increased by 2.3 million while national poverty rate has been reflecting marginal declines for the fourth annual consecutive time.
From 2015 to 2018, the median U.S. household income increased from $70,200 to $74,600, at an annual average rate of 2.1%.
Growth in income was mostly led by the upper income households as a major shift has happened from middle income households to the upper threshold. The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019 while share of adults in the upper-income tier increased from 14% to 20%.
While all household categories have experienced growth in the past decade, the gap in growth rates across the tiers is wide. The top 5% in the upper income households are getting richer faster while the lower income household are not growing at a rapid rate.
Income Inequality in US Average Income
Economic inequality in the United States has changed over time and is a central issue for the Democratic presidential nomination. For the 2020 general election, discussions about policy interventions that might help address it are likely to remain at the forefront.
OECD data reveals that U.S. income inequality is the highest among all the G7 nations based on Gini coefficient which is a commonly used measure ranging from 0 implying perfect equality to 1 indicating complete inequality. In 2017, the U.S. had a Gini coefficient of 0.434 while Gini ranged from 0.326 in France to 0.392 in the UK.
Income inequality is measured in a number of ways with the widely used being 90/10 ratio. In 1980, the 90/10 ratio in the U.S. stood at 9.1, meaning that households at the top had incomes about nine times the incomes of households at the bottom. The ratio increased in every decade since 1980, reaching 12.6 in 2018, an increase of 39%.
Fourth Quarter 2019 Statistics
As per a recent data from Bureau of Labor Statistics, median income for a full-time wage or salary worker in the U.S. (118.3 million) in the fourth quarter of 2019 stood at $48,672 yearly income an increase of 4% from year ago period. Meanwhile, 24.2 million part-time workers in the U.S. recorded median weekly earnings of $284, a 4.41% increase from earlier quarter.
As per demographics which is divided into – white, black or African American, Asian and Hispanic or Latino ethnicity – median weekly earnings for white full-time employees it is $967 and for Asian full-time employees it is $1,166.
The median weekly earnings for full-time black or African American workers is just $756. Full-time Hispanic or Latino workers – the second-highest population of full-time employees – have median weekly earnings of just $712.