Large Jump in Median Household Income Is Great News  

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Headshot of Alicia H. Munnell

is a columnist for MarketWatch and director of the Center for Retirement Research at Boston College.

But the distribution of household income provides one more wake-up call. 

The headlines from the new Census publication – Income and Poverty in the United States: 2015were 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 90th percentile, or in the top tenth of the income distribution.  A household with an income of $214,462 was at the 95th percentile, or in the top 5 percent.  So, many confuse the middle class with the top 5 percent of households.  

Table showing Household Income at Selected Percentiles, 2015

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.   

Table showing the Shares of Household Income by Quintiles, 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.