Income rises for middle-income and bottom-income households
A recent Congressional Budget Office analysis of household income distribution shows that average inflation-adjusted incomes rose for households in every segment of the distribution between 1979 and 2023. This held true both before and after accounting for means-tested transfers and federal taxes. While the highest-earning fifth experienced the most rapid growth, households in the lower and middle fifths also recorded meaningful gains over that long period.
For households in the bottom fifth, average real annual income climbed 50 percent before transfers and taxes and more than doubled, rising 108 percent, once those adjustments were included. These figures underscore broad-based progress rather than gains limited to the top of the distribution. Parallel data indicate that the typical American now has higher real income than at any prior point, with inflation-adjusted median household income reaching a record $87,460 in 2025.
The CBO further observed that recent year-to-year movements continued to favor those of more modest means in at least one recent year. From 2022 to 2023, average income before transfers and taxes increased 5 percent for households in the lowest quintile while falling 9 percent for the top 1 percent, largely because of lower realized capital gains. Other income sources for the highest earners stayed roughly stable that year, and subsequent years saw renewed gains at the top as well.
Further improvement in average incomes remains possible if states reduce occupational licensing rules that limit who can work in certain fields. In the 1950s, only about 4 percent of Americans needed a license to perform their jobs; today the share is closer to 30 percent. Many states once allowed hairstylists and hair braiders to work without licenses, a far less restrictive environment than exists now.
Economist Chris Edwards of the Cato Institute has noted that the expansion of mandatory licensing reduces workforce mobility and erects barriers to employment and advancement. Those barriers fall especially hard on young people entering the labor market, lower-income individuals, people changing occupations or moving across state lines, veterans and military spouses, and those with criminal records.
Research highlighted by the Institute for Justice indicates that licensing requirements generally raise costs for consumers without delivering corresponding improvements in service quality. Licensing boards frequently function more as mechanisms to limit competition than as pure consumer-protection bodies.
On a global scale, average life expectancy and income have reached all-time highs. Child deaths worldwide have declined by 8 million over the past 36 years. The number of children living in extreme poverty dropped to a record low of 412 million in 2024, down from 507 million a decade earlier. Poverty has also continued to fall in most countries each year since 2021, reflecting a broader pattern of rising living standards.
