Friday , 23 October 2020


Median Household Incomes By Age Bracket: 1967-2018

…Households are by no means locked into the same quintile over time as

  • young educated households with professional skills and aspirations will typically move into the higher-earning brackets during their financial life cycles and
  • 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…[by] focusing on the incomes by the age bracket…

1. The first chart shows real household incomes of the six age brackets.

Median Real Income by Age Bracket

2. More revealing is a comparison of the cumulative real growth of median incomes for the six age brackets.

Median Real Income Growth

3. The chart below focuses on the plight of the peak earning age bracket, ages 45-54.

Peak Earning Years: 45-54

There are some immediate observations we can make about the above charts:

  • In the first chart, we see clearly that the 45-54 age bracket lays claim to the peak earning years for U.S. households.
  • In the second chart, we see that the two older age brackets have cumulative growth superior to the peak earnings bracket. In fact, the 65 and older has been the best performer overall, and it has dramatically out-performed since the recession of 2001. We can attribute the out-performance to:
    • the contribution of Social Security to the income stream. It’s a reliable source of income and carries a cost of living adjustment,
    • the contribution of private and government pensions also contributed to the superior growth rate and
    • the surprising growth in the labor force participation rate of this cohort.
  • In the third chart, we see in isolation the earnings decline for the households in the peak ten-year bracket. They have experienced a real decline of 4.0% in earnings since the 1999 peak due to:
    • periods of unemployment,
    • salary cuts,
    • layoffs followed by a lower-paying new job,
    • a multiple-earner household in which one of the earners is a victim of unemployment, reduced employment, etc.
  • The 21st century saw a remarkable decline in income for the first four age brackets with the onset of the Financial Crisis of 2008. As of 2018,
    • incomes for the 25-34 and 65+ age groups reached new highs
    • while the 15-24, 35-44, and 55-64 saw highs in the 2010s.
    • Only one age group, 45-54, saw its peak before 2000.
    • The 35-44 cohort saw the largest increase in 2017, a 3.0% increase from 2016.

For more precise quantification of household income declines in recent years, here is a table showing the peak income year for each age bracket, the 2018 income, and the percentage change since the peak.

Table 1

How about the year-over-year changes from 2017 to 2018? The second table below illustrates the change in incomes for six of the seven cohorts. This year saw improvements with the exception of the 55 to 64 age bracket.

Table 2

Below is a chart of the Michigan Consumer Sentiment, of which there is a general correlation to household incomes. It’s clear that when household incomes are increasing, sentiment tends to be higher.

Michigan Consumer Sentiment

Implications for the Economy

In the 50+ year history of this data series, there has never been such an ugly period of contraction since the Great Recession. The contraction ended shortly after the downturn, within a couple of years, depending on the age cohort. The 2017 data gives hope that household incomes are continuing to increase at a sustainable pace and will not begin declining in the near future.

Editor’s Note:  The above excerpts from the original article by Jill Mislinski have been edited ([ ]) and abridged (…) for the sake of clarity and brevity.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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