Household Income Sees Largest Gain Since '98

More Americans are working, but pay gaps persist

By Stephen Miller, CEBS Sep 14, 2016
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Buoyed by rising employment figures, overall U.S. household income grew at a faster pace last year than at any time in the past 17 years, but the spoils were not evenly shared—especially when comparing the gap between high and low earners.

On Sept. 13, the U.S. Census Bureau released estimates from its annual Current Population Survey showing that the median U.S. household income in 2015 was $56,516—a 5.2 percent increase from 2014 in real (inflation-adjusted) terms.

This was the largest year-to-year increase since 1997 to 1998, when median household income increased 3.7 percent.

"Today's report from the Census Bureau shows the remarkable progress that American families have made as the recovery continues to strengthen," a credit-taking post on the White House blog said.

But real median household income was still 1.6 percent lower last year than in 2007, the year before the Great Recession, and 2.4 percent lower than the median household income peak that occurred in 1999.

Along with several fact sheets, the Census Bureau issued a detailed report on Income and Poverty in the United States: 2015.

Rising median household incomes doesn't correlate exactly with higher take-home pay. One factor accounting for higher household income is that more unemployed or under-employed Americans have found jobs. Between 2014 and 2015, the report notes, the total number of people with earnings increased by about 3.3 million. The number of men and women who are full-time, year-round workers increased by 1.4 million and 1 million, respectively,

Rising employment is one sign of economic growth, which should eventually lead to a tighter labor market and higher compensation. Indications this may be starting to happen can be found in survey's findings on earnings.

Earnings and the Gender Gap

Real median earnings of men and women who worked full time between 2014 and 2015 increased 1.5 percent and 2.7 percent, respectively, the survey showed. This is the first significant annual increase in median earnings since 2009.

Last year, the median earnings of women who worked full time year-round ($40,742) was 80 percent of that for men also working full time year-round ($51,212)—not statistically different from the 2014 ratio, according to the Census Bureau. "The female-to-male earnings ratio has not shown a statistically significant annual increase since 2007," the report notes.

That cautious note, however, was at odds with the tone of the White House blog, which stated that "The ratio of earnings for women working full-time, full-year to earnings for men working full-time, full-year increased to 80 percent in 2015, the highest on record."

Income Inequality

There were also warning signs concerning the growing gap between high- and low-income households. Comparing changes in household income at selected percentiles shows that income inequality has increased from 1999 to 2015, the report showed.

Midlevel and lower household incomes, measured at the 50th and 10th percentiles, declined 2.4 percent and 9.9 percent, respectively, between 1999 and 2015, while income at the 90th percentile increased 5.7 percent during those years.

Moreover, since 1999:

  • The 90th to 10th percentile income ratio (measuring the gap between the two) has increased 17.4 percent.
  • Households in the lowest quintile had incomes of $22,800 or less in 2015, while those in the highest quintile had incomes of $117,003 or more.
  • The top 5 percent of households in the income distribution had incomes of $214,463 or more.

Regions

Growth in median household income last year varied regionally, the Census Bureau found, as shown below:

  • The West (6.4 percent increase in real median household income).
  • The Midwest (5.1 percent increase).
  • The Northwest (4.9 percent increase).
  • The South (2.9 percent increase).

Age

Median household income increases also varied based on the age of the householder:

  • 25- to 34-year-olds (5.6 percent).
  • 35- to 44-year-olds (7.0 percent).
  • 45- to 54-year-olds (4.2 percent).
  • 55- to 64-year-olds (3.5 percent).
  • Ages 65 and older (4.3 percent).

Urban, Suburban and Rural

Households in metropolitan areas experienced a 6 percent increase in real median household income between 2014 and 2015, from $55,920 to $59,258; inside principal cities within metro areas, median income grew 7.3 percent.

In 2015, households inside metropolitan areas but outside the principal cities had the highest median income ($64,144), while households outside metropolitan areas had the lowest ($44,657).

Race and Ethnicity

All racial and ethnic groups saw gains in real median household income last year:

  • Hispanic-origin households (6.1 percent).
  • Non-Hispanic white (4.4 percent).
  • Black (4.1 percent).
  • Asian (3.7)

"This is the first annual increase in median household income for non-Hispanic white and black households since 2007," a Census Bureau fact sheet stated.

Related SHRM Articles:

Weakest Link: U.S. Sees Worst Pay-Growth Recovery Among Developed Nations, SHRM Online Compensation, September 2016

Salary Budgets Expected to Rise 3% in 2017, SHRM Online Compensation, July 2016

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