Incomes rose 6.8% in the U.S. last year—but a closer look shows there may not be much to cheer about

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The real median household income was $68,700 in 2019, up 6.8% from the year prior, according to new data from the U.S. Census Bureau released Tuesday. But a deeper dive into the data reveals the growth may not be as robust on second glance, and many Americans have barely broken even from the setbacks suffered during the last recession. 

This is because the official income estimate likely overestimates the gains. According to the Census Bureau, the survey encountered a significant falloff on response rates in March and April as the coronavirus pandemic impacted millions of Americans and the U.S. economy as a whole. The lower response rates led to what the Census Bureau refers to as "nonresponse bias," meaning that income estimates are likely higher than expected. When this is taken into account, the Census Bureau estimates the real median household income in 2019 was 2.8% lower than the survey estimate, about $66,790. 

That means the change in real median household income between 2018 and 2019 would have been a 4.1% increase instead of 6.8%, according to Elise Gould, senior economist for the left-leaning Economic Policy Institute.

But even if you use the uncorrected metrics, the income growth over the last several years only barely made up for the losses and income disruptions American families incurred during the Great Recession, Gould says. The median income was only 6.5% above where it was in 2000. For households under the age of 65, household income was just 4.3% above its 2000 level.

After correcting for the 2019 nonresponse bias, as well as a 2013 data discontinuity Gould says occurred, she estimates the median household income is now just 3.6% above where it was in 2000. Households only saw a 0.2% average annual growth in income over the 19 years from 2000 to 2019, according to Gould's calculations. 

And those gains are even smaller for Black households, which finally had their median income exceed 2007 levels last year for the first time since the Great Recession. Overall, Black median household income was only 1.4% higher than it was in 2000. In real dollars, that means that the increase in median income was less than $700 over the last 19 years. Black household income is still just 61% of White household income. 

"Many families have just barely made up for lost ground [during Great Recession]," Gould says. In fact, the across-the-board gains experienced by U.S. households last year have taken a long time to materialize following the Great Recession, particularly for workers on the lower end of the income spectrum. Longer than it should have, Gould says, noting that government austerity measures put in place after the last recession constrained federal spending, leading to fewer public jobs and less spending. 

It's important to note that these income levels are pre-pandemic. Gould and other experts estimate that the pandemic and ensuing recession will likely erase much of these gains for most Americans. In fact, because of the pandemic, EPI believes the U.S. will once again be trying to recover lost ground for years to come.

"We've seen that we need a lot more income growth, a lot stronger economy to close those persistent racial disparities that we've seen," Gould says.

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