Lessons from the 2021 Census Income Report

On Tuesday, the Census Bureau released its annual US income report. He’s often a favorite of the partisan left, who use him as a cudgel to beat his opposition to low income growth – especially at the bottom – and inequality. But this year’s report was met with relative silence, perhaps because median household income (adjusted for inflation) fell from $71,186 in 2020 to $70,784 in 2021. , inequality measures have increased.

Unfortunately, these two years encompass the largest economic downturn in US history during the second quarter of 2020, a strong recovery thereafter, and massive transfers following the various stimulus bills. It is useful to recognize that three things are happening.

First, the massive amount of tax dollars transferred to households clearly distorts underlying economic trends, so put that aside and focus on labor income. As shown below, median labor earnings increased overall between 2020 and 2021, from $43,461 to $45,470. However, men’s and women’s earnings moved in opposite directions, with men’s earnings declining while women’s earnings increased.

But note that among full-time, full-year workers, earnings declined for both men and women and, therefore, overall as well. The increase in women’s total earnings reflects the fact that far fewer women were working full time in 2020 (58% vs. 68%), and this gap closed a year later (65% vs. 74%). So second, a big part of the revenue story was a return to more full-time work in 2021.

Labor earnings

(in 2021 dollars)

2020 2021
Number (thousands) Median earnings Number (thousands) Median earnings
Total workers 168 148 $43,461 168,401 $45,470
Men 88,645 $51,446 89,941 $50,983
Women 79,504 $37,527 79 100 $39,201
Full time,

Full year

106,297 $58,897 117,357 $56,473
Men 60,295 $64,217 66,366 $61,180
Women 46,002 $53,387 50,991 $51,226

But why have median earnings dropped among full-time workers? Here it is instructive to compare 2019 and 2021. This is shown below. This table paints a picture in which median earnings are increasing, but the number of workers is decreasing. Comparing the two tables reveals the massive shift in the number of full-time workers, from 119.2 million in 2019 to 106.3 million a year later, and to 117.4 million in 2021.

Labor earnings

(in 2021 dollars)

2019 2021
Number (thousands) Median earnings Number (thousands) Median earnings
Full time,

Full year

119 158 $56,189 117,357 $56,473
Men 67 123 $60,890 66,366 $61,180
Women 52,035 $50,126 50,991 $51,226

Moreover, we know that not all workers were equally exposed to the loss of a full-time job. It was the disproportionate fate of less educated and less skilled workers in service sectors such as leisure and hospitality. The third part of the story is that the full-time workforce in 2020 was much more educated and skilled than the corresponding workers in 2019 and 2021. Median earnings reflect this fact.

Yes, aggregate income has fallen and inequality has increased. But this can be attributed to government policy and changes in the availability of full-time work. This does not reflect a change in the performance of this work.

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