Aba Forson
Average Income in America: What salary in the United States puts you. Economists like to look at changes in gross domestic product 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. People ask the question as “what is the average income,” but in fact, what the U.S. Census Bureau uses is median household income.
Median income means that half of people earn less than that figure and half earn more. It’s actually a more accurate assessment of how well Americans are doing. With average income, a small number of people with very high salaries (America’s growing billionaire class, for example) could jack up the figures so they look better than they really are.
Actually, the latest figures are better than they’ve been for years. Based on U.S. Census Bureau figures for 2015 – the latest year for which the numbers are available – there’s room for optimism. That year such income rose to $56,516. On an inflation-adjusted basis, it’s a 5.2% increase from 2014 – the biggest year-over-year jump since the bureau has been collecting income data.
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Why Median Household Income Is Up
It’s also the first annual increase since 2007, after which the Great Recession of 2008 left millions of Americans without work. Experts see this as evidence that the economic growth the country has seen over the past several years is finally putting upward pressure on wages. What’s more, there are clues that income growth is being enjoyed not just by the upper and middle classes but also by low-wage earners. Of particular note is the fact that the poverty rate fell to 13.5%, down from 14.8% in 2014. (For more, see Which Income Class Are You?)
However, as heartening as those trends are, we’re still struggling to get back to pre-recession wage levels. If you account for inflation, the typical American pay is still 1.6% lower than it was in 2007.
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.
With a median household income of $62,182, the Northeast is the most affluent part of the U.S. It’s also home to the wealthiest state when it comes to median income, New Hampshire. The median household in the Granite State takes home $75,675, more than $19,000 above the national median income.
Americans in the West received nearly as much, with earnings of $61,442 per year. Residents of oil-rich Alaska fared particularly well, with a median household income of $75,112. Those in the Midwest were slightly behind, at $57,082 per year. Minnesotans were the highest wage earners in that part of the country, at $68,730.
Figure 1. According to census data New Hampshire is the state with the highest median household income, $75,675. Mississippi, with a typical income of $40,037, is the lowest-earning state in the nation.
Source: Advisor Perspectives, U.S. Census Bureau
On the bottom end of the spectrum is the South, where the median household income is $51,174 a year. The region is home to four of the five poorest states, including Alabama, Arkansas and Kentucky. The distinction of having the lowest income goes to Mississippi, where the median household made just $40,037 in 2015.
Gender and Racial Pay Gaps
The figures show a continued gender gap in terms of pay, with women earning substantially less than men. Females who worked full time earned a median income of $40,742, according to the census data. That’s roughly 80% of what their male counterparts made: $51,212. (For more, see One Big Factor Driving the Gender Pay Gap.)
There’s also a significant income divide among racial groups. The median yearly income for white households was $62,950. However, Hispanic families took home $45,148 in pay, while black earners made even less, at just $36,898. The highest earners of all were Americans of Asian descent, at $77,166 per year.
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 along gender and racial lines. (For more, see America’s Compensation Gap Shows No Signs of Slowing.)
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