How Did Household Income Change From 2021 To 2022?

Inflation ramped up in 2021, increasing the cost of routine expenses. On average, inflation was 4.7% for the year, and it only got worse in 2022, with an average of 8.0%. Was household income able to keep up, or did it fall short, leaving U.S. consumers with less cash in their pockets? To answer this question, I referenced data showing household income each year at each household income percentile compiled by DQYDJ from the United States Census Bureau’s Annual ASEC survey, which was released in September 2022. Below you can see graphs showing the change and percent change in household income from 2021 to 2022 by percentile.

For context, household income is the sum of all income earned in a household, including wage income, business income, investment income, etc. It should also be noted that this data does not follow the same households each year. A household in a low percentile one year could be in a much higher percentile the next. That said, the data can still give us an idea about how incomes have changed at varying income levels.

Here is the change in household income from 2021 to 2022:

Nominal change in household income by household income percentile from 2021 to 2022 (data source: DQYDJ)

As you can see, household income increased for most households from 2021 to 2022. The 25th percentile increased from $33,003 to $34,429, the 50th percentile (or median) increased from $67,463 to $70,181, and the 75th percentile increased from $122,500 to $129,550. Unsurprisingly, the increase was larger for higher income percentiles, with the biggest increases for the 98th and 99th percentiles. The 98th percentile increased from $386,915 to $417,179, and the 99th percentile increased from $504,420 to $570,003.

How this increase came about is unclear. It could be due to wage growth, increasing business profits, or strong stock market performance (the S&P 500 went up about 28% in 2021).

To get a better picture of how income has changed, we should look at the percent change, shown here:

Percent change in household income by household income percentile from 2021 to 2022; 4.7% average inflation in 2021 is indicated with an orange dashed line (data sources: DQYDJ, US Inflation Calculator)

This graph looks quite different from the nominal change. First, you can clearly see that the lowest income percentiles actually had a fairly significant decrease in household income. Second, you can see that most households’ income actually came pretty close to keeping pace with the 4.7% inflation, although this is less true for lower income households. The increase in income appears to ramp up to about the 23rd percentile and then hold relatively steady (though with a slight increase) until the 98th and 99th percentiles, which grew at a much higher rate than other households.

It will be interesting to see how household income changes from 2022 to 2023 once the data is available, since inflation was even higher in 2022. The stock market also fell into a bear market in 2022, which may also have had an effect on household income. Whether household income could still mostly keep pace with inflation in that environment is unclear. Unfortunately, we won’t know for about another 6 months.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s