Board of Governors of the Federal Reserve System

Income

Income is central to most people's economic well-being. The ability to meet current expenses and save for the future typically depends on income being sufficient and reliable. Some depend on outside financial support from, or provide such support to, their family or friends. Frequent changes in the level of family income, referred to here as "income volatility," can be a source of economic hardship. This income volatility was disproportionately prevalent for those working in industries such as construction or leisure and hospitality in 2019.

Level and Source

Family income in this survey is the cash income from all sources that the respondent and their spouse or partner received during the previous year. Income is reported in dollar ranges as opposed to exact amounts. One-quarter of adults had a family income of less than $25,000 during 2019 and 37 percent had less than $40,000 (figure 5).¹³

Wages, salaries, and self-employment were the most common source of family income received, with 7 in 10 adults and their spouse or partner receiving wage income during 2019. Yet, over half of adults (54 percent) also received non-wage income in their family.

The sources of income varied substantially by race and ethnicity in 2019 (table 4).¹⁴ Sixty-two percent of black adults and 66 percent of Hispanic adults received wage or salary income. Seventy-one percent of white adults received wage or salary income. Similarly, while one-third of all adults received property income (interest, dividends, or rental income) in 2019, 15 percent of black adults and 16 percent of Hispanic adults received property income.

Table 4. Family income sources (by race)

Assistance through social safety net programs also plays a role. Non-cash transfer programs supplemented income for some families. Overall, 14 percent of adults reported receiving support from one or more non-cash transfer program in the survey. This exceeds the 7 percent who received cash transfer income other than Social Security.¹⁵

Consistent with differences in overall income by race and ethnicity, black and Hispanic adults were disproportionately likely to receive both cash and non-cash transfer income. For example, 12 percent of black adults and 9 percent of Hispanic adults received a cash transfer other than Social Security. Similarly, 27 percent of black adults and 23 percent of Hispanic adults received non-cash transfer income. Each of these exceed the prevalence seen among the overall adult population.

Financial Support from Family and Friends

One in 10 adults received some form of financial support from a friend or family member living outside of their home in 2019. Young adults were more likely to receive financial support, with nearly 4 in 10 people ages 18 to 24 and nearly 2 in 10 between ages 25 and 29 receiving such support.¹⁶ Conversely, adults age 30 and older were more likely to provide financial support to others. Providing support peaks at ages 45 to 59, with one-quarter of adults in this age range providing such support (table 5).

Table 5. Receiving and providing financial support outside of the home (by age)

Financial support is mainly between parents and adult children, with over two-thirds of recipients indicating the support they received came from a parent in 2019. An even higher 87 percent of recipients under age 30 indicated that the support came from a parent. Support also flows up generations. Although relatively few people over age 60 received support from outside their home, 56 percent of those who did received it from their adult children.

Those struggling financially were more likely to receive support than those doing at least okay: 20 percent compared to 6 percent in 2019. Yet despite experiencing their own financial challenges, 14 percent of those struggling financially also provided financial support. One-fifth of families who received support in the past year also provided support to someone else.

Financial support from family and friends takes many forms. Among young adults under age 25, nearly one-fourth received money for general expenses, 21 percent received money for other bills, and 15 percent received money for rent or mortgage payments. In addition, 16 percent received help with education or student loans. The most important forms of support were similar for people in their late 20s (figure 6).

Income Volatility

The level of income during the year as a whole may mask substantial changes in income from month to month. The survey considers how mismatches between the timing of income and expenses may lead to financial challenges.

Income in 2019 was roughly the same from month to month for 7 in 10 adults, varied occasionally for 2 in 10, and varied quite often for slightly less than 1 in 10. This generally matched the level of income volatility observed in 2018.¹⁷ Some families can manage these frequent changes in income easily, but for others this may cause financial hardship. In fact, over one-third of those with varying income, or 1 in 10 adults overall, said they struggled to pay their bills at least once in the past year due to varying income.

Income volatility varied by industry. Those in professional and business services, public administration, manufacturing, financial activities, information, and education and health services industries were more likely to report stable income. Fewer than 3 in 10 people working in each of these sectors reported income that varied at least occasionally in 2019. Those working in construction, or in the leisure and hospitality sector, were more likely to report unstable income. At least 4 in 10 workers in each of these industries reported that their income varied at least occasionally (figure 7).

A substantial number of adults engage in "gig work," or informal paid activities. This can be used to smooth income for some. More frequently, however, those doing gig activities indicated that it is instead a source of volatility. Of those who participated in gig work, 27 percent said that their gig activities increased the volatility of their income. A smaller 6 percent of gig workers said that their gig activities reduced the amount of volatility. (Gig work, including details on specific activities, is discussed further in the "Employment" section of this report).

One way that those with volatile incomes can smooth consumption is through borrowing, but only if credit is available. Those who felt that credit was unavailable were more likely to report volatility-related financial hardships. Among adults who were not confident in their ability to get approved for a credit card, 3 in 10 experienced hardship from income volatility in the prior year. This compares to 6 percent of those who were confident in their credit availability who experienced volatility-related hardships (table 6). (Access to credit is discussed further in the "Banking and Credit" section of this report.)

Table 6. Income volatility and related hardship (by credit confidence)

 

References

 

 13. The income distribution in the 2019 SHED is largely similar to the 2019 March Current Population Survey, although a higher fraction of adults in the SHED said that their income, and that of their spouse or partner, was at least $40,000 and a lower fraction had incomes below $40,000. The higher income may partly reflect the fact that unmarried partners were treated as one family in the SHED, while in the Current Population Survey they appeared independently. Return to text

 14. Although sources of income additionally vary with age, analyzing by age cohorts along with race and ethnicity did not weaken these results. Return to text

 15. Non-cash transfer programs included were the Supplemental Nutrition Assistance Program (SNAP); the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); housing assistance; and free and reduced-price school lunches. Cash transfer programs included were Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), cash assistance from a welfare program, and unemployment income. Return to text

 16. This question asked specifically about support from outside the home. As discussed in the "Housing" section of this report, some people also lived with others for financial reasons. Return to text

 17. As discussed in the Report on the Economic Well-Being of U.S. Households in 2016, this volatility can occur for a variety of reasons. Some, such as irregular work schedules, may result in months with unexpectedly low incomes, whereas others, such as bonuses, may result in months with unexpectedly high incomes. Return to text