The inflation-adjusted median income of US households rose by 4% in 2023, reaching approximately $80,610, according to an annual report released by the Census Bureau.
This increase, shown in a Tuesday report, brings median household income back to roughly its 2019 level of $81,210, effectively restoring most Americans’ purchasing power after the significant price spikes experienced during the pandemic.
This marks the first increase in median household income since 2019, indicating a rebound from the economic disruptions caused by COVID-19 and the highest inflation rates in four decades.
“We are back to that pre-COVID peak that we experienced,” said Liana Fox, assistant division chief in the Social, Economic, and Housing Statistics Division at the Census Bureau.
The proportion of Americans living in poverty slightly decreased to 11.1% in 2023 from 11.5% in 2022. However, under an alternative measure of income, child poverty rates rose from 12.4% to 13.7%. This increase comes two years after a significant decline in child poverty, which had been attributed to the expanded Child Tax Credit during the pandemic. The expiration of this credit in 2022 is seen as a contributing factor to the recent rise.
Strong job creation played a role in boosting household incomes. The unemployment rate dropped to a 50-year low of 3.4% in April 2023, and the employment rate for individuals aged 25 to 54 averaged 80.7% last year—the highest level in 23 years. This prime-age employment is significant, as it excludes younger individuals who may still be in school and older individuals who may be retired or working fewer hours.
Income gains were not evenly distributed across different demographics:
- White households saw a 5.4% increase in median income to $84,630.
- Black households experienced a 2.8% rise to $56,490.
- Hispanic households remained relatively unchanged at $65,540.
- Asian households also saw little change, with median income holding at $112,800.
Notably, the earnings gap between men and women widened for the first time in over two decades, as men’s incomes grew more than women’s in 2023.
While the general poverty rate decreased, an alternative measure showed that the proportion of children living in poverty rose from 12.4% to 13.7% in 2023. This increase comes two years after the child poverty rate had dropped to 5.2%, largely due to the temporary expansion of the child tax credit during the pandemic. The expiration of the enhanced credit in 2022 is linked to the recent rise in child poverty.
“If you want to reduce poverty in the short run, you transfer income to poor families,” noted Steven Durlauf, an economist at the University of Chicago
The Census Bureau also reported that 92% of Americans had health insurance in 2023, a figure largely unchanged from the previous year. However, the proportion of uninsured children saw a slight uptick to 5.8%.
While the typical American household has regained its pre-pandemic purchasing power, the data indicates that living standards have essentially remained flat since 2019. This contrasts with the period from 2015 to 2019, when inflation-adjusted median incomes rose by 14%.
Economists anticipate that inflation will continue to ease, with forecasts suggesting a decrease from 2.9% in July to 2.6% in August. As inflation approaches the Federal Reserve’s target rate of 2%, the central bank is poised to begin cutting interest rates next week.
With input from the Associated Press and CBS News.
