Many American families feel they can't get ahead financially – and they're right – Center for Retirement Research

3 long-standing misconceptions about workers and income.

The Census Bureau's annual report on household income trends always provides an opportunity to compare facts with perceptions. These misconceptions relate to what it means to be in the top 50%, income and income growth over time, and inequality in income distribution.

Opinion: Households in the upper half of the district earn hundreds of thousands a year.

Fact: If you're a person who works with finance and others who worry about retirement income, it's easy to fall into the notion that the mass affluent — households in the upper half of the income distribution — make hundreds of thousands in annual income. This is not the case. The 2024 data once again show how little most American households own, and how slowly those numbers are growing over time.

Table 1 lists the amounts associated with different parts of the income distribution. Households with $83,730 are in their 50s^th Percentile, located in the middle of the income distribution. Those earning $175,700 dropped to 80th place^th percentile, placing it within the top 20% of all households. Only those born in the 90s^th Percentile and above earn more than $250,000. While these thresholds must be interpreted with caution – they include old and young, rural and urban, coastal and midlands, small and large – the data do suggest that most households do not have significant incomes. Combine these income levels with high prices, and it's easy to see why affordability is so important.

Perception: Economic growth means rapid increases in income and income.

Fact: The truth is, the long-term trends are not encouraging. Although the income of the median household has increased over the past 35 years, after adjusting for inflation, the figure in 2024 will be almost the same as in 2019 (see Table 2). Understandably, families feel like they're walking on thin ice, and that's exactly what they are.

One major reason household incomes have not increased is that incomes (adjusted for inflation) have remained relatively stagnant (see Table 3). Real earnings for all male workers in 2024 will be only 23% higher than in 1989; the increase for men who work full time year-round is even smaller – 13%.

Opinion: Growing income inequality is our most serious problem

Fact: The concentration of wealth is more extreme than the distribution of income. In 2024, the top 5% of households will receive 22.9% of total income. By comparison, the richest 1% of households own 30.9% of the wealth. Clearly, if comparable data on income and wealth holdings were readily available, the top 5% in terms of wealth would have much more. So, the first point is that wealth is much more concentrated than income. The second point is that inequality in wealth is growing much faster than inequality in income. Specifically, between 1989 and 2024, the share of wealth owned by the top 1% increased by 35%, while the share of income received by the top 5% increased by 22%.

The bottom line is that those who work for a wage have less money than is generally imagined, and they make less progress than many people imagine. Although most attention has focused on income inequality, this phenomenon pales in comparison to large and growing wealth holdings. Our tax system contributes to and exacerbates this wealth situation because while working-class people pay income and payroll taxes, the wealthy avoid them almost entirely.