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Here’s Why Median Household Income Did
Not Grow

Friday, November 1, 2019

From Demo Memo, Cheryl Russell

For a full decade, median household income struggled to return to the pre-Great Recession peak of $62,700 in 2007 (in 2018 dollars). It finally got there in 2017 and stayed there in 2018. Some might question why American households have made no economic progress in more than a decade, but a look at trends in household income by age group reveals that most households have gained ground.

Percent change in median household income by age of householder, 2007 to 2018 (in 2018$)
Total households: 0.8%
Under age 25: 9.7%
Aged 25 to 34: 3.5%
Aged 35 to 44: 4.2%
Aged 45 to 54: 3.4%
Aged 55 to 64: –3.7%
Aged 65 to 74: 16.7%
Aged 75-plus: 20.5%

Note: Percent change calculations between 2007 and 2018 were made after adjusting 2007 median household income to make it comparable to 2018 income as per Census Bureau guidance in: Survey Redesigns Make Comparisons to Years Before 2017 Difficult.

While the overall median did not increase significantly between 2007 and 2018, every age group but one experienced a significant increase, after adjusting for inflation. How could the overall median remain unmoved when almost everyone experienced a gain?

The answer is the changing age structure of the population, thanks to Baby Boom and Baby Bust. In 2018, there were many more older householders (with lower incomes) than in 2007 as boomers aged into their sixties and seventies. The share of households headed by people aged 65 or older grew from 21 to 27 percent of the total during those years. Conversely, there were fewer middle-aged householders (in their peak-earning years) in 2018 than in 2007 because the small Generation X was in the 35-to-54 age groups. The share of households headed by 35-to-54-year-olds fell from 40 to just 34% during those years. These shifts depressed growth in the overall median and will continue to do so until the large Millennial generation is more of a presence in the peak-earning age groups.

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