Large Jump in Median Household Income Is Great News  

The headlines from the new Census publication – Income and Poverty in the United States: 2015 – were that median household income increased by 5.2 percent and that the percentage of households in poverty dropped by 1.2 percentage points.  That is wonderful news indeed.  

A less publicized part of the report pertains to the distribution of income, and it always provides a reality check on what it means to be “middle class” and what it means to be “rich.”  Politicians, the financial services industry, and others often characterize the middle class as those with incomes of about $200,000.  

The new Census report shows that the household in the middle of the income distribution in 2015 had an income of $55,516 (see Table 1).  A household with an income of $162,180 was at the 90^th percentile, or in the top tenth of the income distribution.  A household with an income of $214,462 was at the 95^th percentile, or in the top 5 percent.  So, many confuse the middle class with the top 5 percent of households.  

Maybe the confusion arises because the “median dollar” of all U.S. household income combined falls at roughly the $200,000 level.  As shown in Table 2, those in the top quintile – the highest fifth of the income distribution – earned more than 50 percent of the income in 2015.   

Of course, the data must be interpreted with caution because households include old and young, urban and rural, coastal and midland, and small and large.  But it is very hard to understand how anyone could think of $200,000 as the middle.  Yet, many do.