Household income is the amount of combined income of people living together in one household or residence. Wages, salaries, investment gains, government cash transfers, and retirement income are all included in the income of a household. A government uses the average household income to determine the financial well-being of its people. Median household income is the mean of disposable income of a household. It involves the calculation of a household's income after tax and other contributions. It is important for a country to find the mean household income of its citizens to better assess living standards.
The median household income in the United States as per the Federal Reserve was $56,516 in 2015. However, there was still a large inequality in the median household income of the different states in the US. On average, the southern states displayed a lower median household income. Most states that had their levels below average income were the located in the rural areas of the southern states.
In 2015, the median household income of the United States was as low as $40,037 in Mississippi. Other countries that recorded low median households were Kentucky $42,387, Arkansas $42,798, West Virginia $42,824, Alabama $44,509, New Mexico $45,119, and Louisiana $45,922.
Possible reasons for the low household income in the above states
The United States had a poverty rate of 13.5% in 2015. Most of the poverty-stricken states were the rural areas of the mountains and southwestern states like New Mexico. When the households are poor, the amount of disposable income is reduced and the net household income becomes insufficient. In 2015, 43.1 million people in the United States lived in poverty. It has been found that 9 out of the 15 countries with low household incomes are rural areas in the southern states.
Most households in the metropolitan areas have a household income above the average income levels while the people in the rural areas have lower incomes. The urbanized north-eastern states, the Midwest, and the West Coast states reported the highest household incomes. This shows an uneven income distribution. The majority of the households in these urban areas are the working class group of individuals who have a higher income. The rural areas are disadvantaged by the lack of infrastructure and potential job opportunities that attract workers. There is also income inequality in terms of gender. In the 2015 statistics, the average income for men was $90,761 compared to $50,756 for women. A state where most of its men are jobless has a lower household income compared to states that have most of its employees as men.
Level of Education
Education is directly related to the levels of household income of a state. Household income rises with an increase in educational attainment. As per the US Census Bureau, individuals with doctorates had an average income of approximately $81,400 and those with degrees average $72, 824. Most of the colleges and institutions of higher education are found in more urban areas.
It is evident that the household income tends to be affected by the level of economy in a state. Education levels, poverty, and the unequal distribution of income are the major causes of low household income. Another factor that could determine the level of an individual’s income is age. Unless the above issues are addressed by the US government, these states will continue reporting low household incomes.