Household purchasing power dynamics by income, race, and age

Income drives financial health, and changes in households’ purchasing power—incomes adjusted for changes in consumer prices—provide an indicator of how well the economy’s overall performance is passing through to individuals’ ability to support spending and saving goals. In this two-part analysis, we update prior Institute reporting on real incomes and provide a new perspective focusing on lifecycle income gains by age group. Both reports center on median experiences of millions of individuals over time, a unique perspective relative to aggregated publicly available statistics.

The purchasing power of household incomes: Worker outcomes through July 2024 by income and race. While incomes have not fallen behind price increases outright, gains over this four-and-a-half-year period have been disappointing, considering the expected career progression (or “lifecycle”) effects as we track individuals’ incomes over time. Lower-income individuals and Black and Hispanic individuals have experienced better relative outcomes, although progress in the past few years has been small. The still relatively robust labor market can help explain why more financially vulnerable groups have fared better.

Climbing up (or off) the career ladder: Lifecycle income progression by age. We introduce a new perspective that shows real income paths for individuals experiencing the pandemic at different stages of their careers, relative to same-age cohorts in prior periods. Individuals across age groups have seen slow real gains over the past few years that are near the low-end of ranges seen during the 2010s. Those in their later 50s and 60s have seen particularly poor performance, likely due in part to a rise in early retirements during the pandemic.