U.S. household incomes saw a significant rebound in 2023, returning to levels last seen before the COVID-19 pandemic, according to new data released by the U.S. Census Bureau. The report offers a mixed picture of the economic landscape, highlighting both positive gains in income and troubling indicators regarding poverty and income inequality.
Real median household income, adjusted for inflation, increased by 4% in 2023, reaching $80,610. This marks a return to the income levels of 2019, a peak year before the pandemic severely disrupted the global economy. The rise in income reflects the broader economic recovery that has taken place as the U.S. economy continues to grow, unemployment rates remain low, and inflationary pressures ease.
"We are back to that pre-COVID peak that we experienced," noted Liana Fox, assistant division chief in the Social, Economic, and Housing Statistics Division at the Census Bureau. The income gains come after several challenging years where workers saw their earnings eroded by the highest inflation rates in more than four decades.
However, the positive news on income was tempered by less encouraging data on poverty. The official poverty rate, which does not account for government assistance, fell slightly to 11.1% from 11.5% in 2022. Yet, the supplemental poverty measure, which includes government aid and living expenses, showed an increase to 12.9% from 12.4%. This rise is partly attributed to the expiration of pandemic-era government benefits, such as enhanced food assistance and child tax credits, which had provided crucial support to low-income households.
The increase in the supplemental child poverty rate was particularly striking, jumping to 13.7% from 12.4% the previous year. This rise followed the end of expanded child tax credits, which had temporarily lifted many children out of poverty during the pandemic. As Steven Durlauf, an economist at the University of Chicago, observed, "If you want to reduce poverty in the short run, you transfer income to poor families."
The Census Bureau's report also highlighted the growing income disparity between men and women. For the first time since 2003, the gender pay gap widened, with women's median earnings growth falling behind that of men. While men's real median earnings increased by 3.0%, women saw a smaller gain of 1.5%. This disparity was partly attributed to a rise in the number of Hispanic women in the workforce, who typically earn less than their male counterparts.
Despite the gains in income, the report underscores the challenges that many Americans still face. While the economy has recovered from the pandemic-induced recession, the data suggests that the benefits of this recovery have not been evenly distributed. For example, while median household incomes rose for white and Black Americans, they remained unchanged for Hispanic and Asian households.
The report's findings arrive at a critical time, just months before the U.S. presidential election, where economic issues are expected to be front and center. The data offers both parties material to bolster their arguments. On one hand, the Biden administration can point to the income gains as evidence of successful economic policies, while on the other hand, critics may highlight the persistent poverty rates and widening gender pay gap as areas where more work is needed.
Employment growth also played a significant role in driving household income gains. The U.S. economy added an average of 250,000 new nonfarm payroll jobs per month throughout 2023, well above the pre-pandemic average. This job growth helped reduce the unemployment rate to a half-century low of 3.4% in early 2023, further boosting incomes as more Americans returned to full-time work.
The data also reveals that 92.0% of Americans had health insurance coverage in 2023, a figure that remains largely unchanged from the previous year. However, the proportion of uninsured children increased slightly to 5.8%, a concerning trend that suggests gaps in healthcare coverage for some of the nation's most vulnerable populations.
