Income is a strong indication of a family’s material well-being. Families need a certain base level of income to meet their basic needs for food, clothing, shelter, health care, and any costs related to sustaining a job. Further, children raised in higher-income households demonstrate higher academic achievement and educational attainment, better physical and mental health, and fewer behavioral problems than their peers from lower-income households.
Metric: Household income at the 20th, 50th, and 80th percentiles
Household income is a standard measure of financial well-being. The Working Group recommended the metrics at these three levels to track how and for whom incomes are changing in a given place as well as whether incomes are rising across the board or are rising more for those with higher incomes. To identify income percentiles, all households are ranked by income from lowest to highest. The income level at the threshold between the poorest 20 percent of households and the richest 80 percent is the 20th percentile. Similarly, the threshold between the poorest and richest halves is the 50th percentile (or median), and the threshold between the poorest 80 percent and richest 20 percent is the 80th percentile.
Validity: These are well-established measures, and several federal agencies and many scholars frequently use them to assess families’ financial well-being.
Availability: Data on household income are available from the Census Bureau’s American Community Survey and Public Use Microdata Sample.
Frequency: New data for the metric are available annually. For subgroup analyses in less populated areas, several years of data may need to be pooled to obtain reliable estimates.
Geography: Data are available at the county and metropolitan levels.
Consistency: Income data are measured the same way across all geographies in the same year. The measure is fairly consistent over time, but changes in the phrasing and sequence of income source questions might affect comparisons over time. When such changes have occurred in other federal surveys, such as the Current Population Survey, the Census Bureau provides bridge-year data so users can assess the effects of survey changes
Subgroups: The metric can be disaggregated by race or ethnicity, gender, and other demographic factors. For less populated areas and for certain demographic groups, several years of data may need to be pooled to obtain reliable estimates.
Limitations: The purchasing power of any particular level of income will vary based on the local cost of living. Also, because household sizes differ, the same income may be stretched across larger average households in some places relative to others. Like all metrics based on the characteristics of people living in an area, it can change because of residential mobility.
