Wednesday, September 15, 2021

Median Household Income in 2020: $67,521

One of the most closely watched economic statistics was released yesterday by the Census Bureau. According to the 2021 Current Population Survey (CPS) fielded in March 2021 (which asks about income in the previous year), median household income in 2020 was $67,521. This is 2.9 percent below the record high median of $69,560 in 2019, after adjusting for inflation. Here is the trend in median household income over the years...

Median household income for selected years (in 2020 dollars)
2020: $67,521
2019: $69,560 (record high)
2018: $65,127
2012: $57,623 (post Great Recession low)
2010: $58,627
2000: $63,292
1999: $63,423 (previous record high)

But there's a problem with both the 2020 and 2021 medians. Remember the low response rate to the 2020 Current Population Survey, fielded in March 2020, as everything shut down because of the coronavirus pandemic? The response rate was just 73 percent—a good 10 percentage points lower than normal. Even worse, higher-income households were more likely than lower-income households to respond to the survey. No wonder median household income in 2019 leaped up by 6.8 percent—a bigger one-year increase than ever before in CPS history dating back to 1967. The Census Bureau published a working paper about the problem (Coronavirus Infects Surveys, Too: Nonresponse Bias during the Pandemic in the CPS ASEC). In the paper, bureau analysts Jonathan Rothbaum and Adam Bee adjusted the 2019 median for nonresponse bias. After the adjustment, they estimated median household income in 2019 to be a smaller $66,790—but still the highest ever recorded by the CPS.

What about the median income number released yesterday? Unfortunately, the March 2021 CPS has the same problems, according to an analysis by Rothbaum and Charles Hokayem (How Did the Pandemic Affect Survey Response: Using Administrative Data to Evaluate Nonresponse in the 2021 Current Population Survey Annual Social and Economic Supplement). While the survey response rate rose to 76 percent, it was still well below normal. Not only that, but "nonresponse bias in 2021 looks more like it did in 2020 than in prepandemic years," Rothbaum and Hokayem report. Consequently, they estimate the 2021 median to be about 2 percent lower than the $67,521 shown above. The good news is that even after the adjustment median household income in 2021 is about the same as the adjusted 2019 median—in other words, surprisingly close to a record high.

Source: Demo Memo analysis of Income, Poverty and Health Insurance Coverage in the United States: 2020

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