Our commentary on household income distribution focuses on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 50+ year history of this data series. The analysis offers some fascinating insights into U.S. household incomes.
But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time. Young educated households with professional skills and aspirations will typically move into the higher-earning brackets during their financial life cycles. Households dependent on income from unskilled labor and non-professional service employment will not see the same financial progress over the years.
So let's review the household income data another way, this time focusing on the incomes by the age bracket. The data we're analyzing is the median (middle) household income of the age bracket for the heads of household (see Table H.10 for all races).
Because this is a longitudinal analysis across nearly five decades, including the stagflation of the 1970s, we've used the Census Bureau's real (inflation-adjusted) series chained in 2023 dollars based on a research variant of the Consumer Price Index, the CPI-U-RS. In other words, the incomes in earlier years have been adjusted upward to the purchasing power of the most recent year in the series.
The first chart shows real household incomes of the six age brackets.
Below is a more precise quantification year-over-year household income changes from 2022 to 2023. All cohorts saw growth in 2023, some only slightly while others more significantly.
But more revealing is a comparison of the cumulative real growth of median incomes for the six age brackets.
The 65+ cohort had the smallest median household income, but this is the age group that has also experienced the most income growth since 1967. From the chart above, you can see it has dramatically outperformed since the turn of the century. We can no doubt attribute the outperformance to the contribution of Social Security to the income stream. It's a reliable source of income and carries a cost of living adjustment. Private and government pensions also contributed to the superior growth rate. Another key factor is the surprising growth in the labor force participation rate of this cohort, a topic we track in our monthly review of long-term trends in the workforce.
Additionally, and unsurprisingly, the youngest age bracket of 15-24 has one of the lowest median household incomes and the smallest median income growth since 1967. This is understandable, as this age group includes teenagers and college students who are typically not yet in the workforce, as well as individuals just starting their careers in entry-level positions or those still exploring their professional paths. As a result, many are in roles that tend to offer lower pay, contributing to the overall lower income figures for this age range.
