A few months ago, the Census Bureau released its annual report on household income data for 2023. During 2023, the median (middle) average household income rose 8.0% to $80,730. Let's take a closer look at the quintile averages, which dates from 1967, along with the statistics for the top 5%.
Most people think in nominal terms, so the chart below illustrates the current dollar values for the six cohorts across the 50+ year period (in other words, the value of a dollar at the time received — not adjusted for inflation). What we see are the nominal growth patterns over the complete data series. In addition to the five quintiles, the Census Bureau publishes the income for the top five percent of households.
All segments showed an increase in year-over-year in average household income - again in current dollars.
Inflation-Adjusted Reality
The chart below adjusts for inflation in chained 2023 dollars using a research variant of the Consumer Price Index, the CPI-U-RS, which is the Census Bureau's preferred deflator for inflation adjustment. In other words, the incomes in earlier years have been adjusted upward to the purchasing power of the most recent year in the series. Even when adjusted for inflation, all cohorts saw increases in 2023 from the previous year, albeit not as large.
As for the cumulative household income growth by segment over the past 50+ years, the next table shows the real, inflation-adjusted, difference between 1967 and 2023.
To give us a better idea of the underlying trends in household incomes, we've also prepared a chart of the real percentage growth since 1967. Note in particular the growing spread between the top quintile (and especially the top 5%) and the other four quintiles. The growth spread began in the mid-1980s during the Reagan administration, the era of Supply Side Economics (aka "Reaganomics" and Trickle-Down Economics). As this chart illustrates, tax and other policy changes to benefit the wealthier households didn't have the heavily promoted trickle-down effect.
The table below documents the percent change from each cohort's peak earning year. All cohorts hit record highs in 2019 and then the top quintile (and top 5%) hit new highs in 2021.
It's important to understand that the data in the charts above is for the mean (average) income for each of these segments. For US households quintiles, the mean (average) income is higher than the median (middle of the range). To hear more about this negative skew, check out the commentary on household incomes by age bracket.
Read more updates by Jen Nash
