In 2020, the average household income was $97,026. The median household income—the number more frequently cited—was $67,521.
Average Income in 2020
The median household income dropped to $67,521 in 2020, declining from $69,560 in 2019. The median household income has been steadily rising since 2010, so this was the most significant drop since then. The government uses the average family income to report the poverty threshold for statistical purposes. It also uses these figures to establish the poverty levels that determine eligibility for healthcare subsidies and welfare programs.
Types of Averages
The U.S. Census Bureau uses two different methods to report income. Here’s a look at those types.
Mean and Median
The mean is similar to an average—it adds all incomes and divides by the number of people reported. The mean income is taken from a list of reported incomes and represents the numeric middle number—the point where half make more and half make less. As a simplified example, imagine five people make the following in one week:
Joe: $1,050Jane: $2,050Joan: $3,050Chris: $4,050Christy: $6,500
Joan’s weekly income, $3,050, is the group’s median income because it is the middle number. The mean (average) income of the group is $3,340. It is slightly higher because Christy makes much more in a week than the rest. On the national level, the mean income is usually much higher than the median because the income gap is so large. If the mean were used to report income levels, it would give an inaccurate estimate because it’s affected by the income inequality in the United States. For this reason, most reports use the median income but call it the average.
Real and Nominal
Pay attention to whether real or nominal income is being reported. Real income removes the effects of inflation. To compare income levels over time, real income must be used. Nominal income ignores the changing cost of living, again giving an inaccurate income picture.
Whom Does the Census Report Average Income For?
The Census Bureau reports average incomes for three different groups:
The income per person is the income for each person age 15 or older. It’s more commonly known as “income per capita.” Family income is the average for a family of two or more related people living in a household. They can be related by birth, marriage, or adoption. Household income is the average income of all people living in a housing unit. It doesn’t matter whether they live alone, with a family, or with a group of unrelated individuals such as friends or roommates.
The Census also breaks down income by age, relationship to the household, race, education, and type of housing.
How Did Average Income Change in 2020?
American household income rose substantially in 2019 and dropped in 2020. This represents a decrease of 2.9% in real median household income. Household median income rose from $65,127 in 2018 to $69,560 in 2019, then dropped to $67,521 in 2020.
Family Median Income
Real median income dropped 3.4% for families, from $87,085 in 2019 to $84,088 in 2020. Families include related members in a household. As expected, the mean family income was much higher, at $114,962. However, this was a 2.7% drop from the 2019 level of $118,192.
Individuals
Income levels for individuals also decreased:
The 2020 real median income per capita was $35,805. That’s 1.7% lower than the 2019 income of $36,426.As expected, the mean (average) income per capita, which was $53,996. That’s .25% lower than 2019’s level of $54,129.
U.S. Average Income: 2000 to 2020
The table below compares the change in U.S. average income between 2000 and 2020. It also shows economic growth and unemployment for those years. After the 2001 recession, incomes didn’t improve until 2005. The economy grew, but it didn’t translate to higher incomes. Many jobs were replaced by technology or moved overseas. Incomes didn’t recover after the crisis because many of the jobs created before the recession were in financial services and construction. Those jobs did not return in 2009. Instead, the jobs were in low-paying areas such as retail and food services. In addition, many employers hired temporary or freelance workers instead of offering full-time positions. In 2010, Congress focused on reducing the debt instead of creating jobs. As the chart below shows, the unemployment rate fell as people dropped out of the labor force, but incomes did not rise. In 2013, income began to improve as unemployment fell. In 2016, average income finally exceeded the pre-recession peak. The economy steadily improved through 2019, dropped in 2020, then recovered in 2021. Note: The percentage change for 2017 is not applicable because the Census changed the questionnaire.
U.S. Federal Poverty Threshold
The U.S. government uses average family income statistics to report the federal poverty threshold. Since average income was higher, the number and percentage of those living below the threshold dropped. In 2020, 37.2 million Americans were living in poverty, 3.3 million more than in 2019. This figure raised the percentage of people living in poverty to 11.4%, up from a record low of 10.5% in 2019.
The Bottom Line
The U.S. average—the median, not the mean—income indicates how much money average Americans are earning. It’s a broad measurement of how much is available to spend. It’s important because consumer spending drives 70% of the economy. If consumers make more money, they have more to spend. More spending money stimulates economic growth, and economic growth can lead to higher wages.
