Board of Governors of the Federal Reserve System

Income

A sizeable share of adults said their family's monthly income increased in 2023 compared with a year earlier. However, the share of adults who said their spending increased from the prior year was even greater. The share of adults who said they spent less than their income in the month before the survey remained lower than the level it had been before the pandemic, suggesting that fewer adults have margin in their family budgets.

Level and Source of Income

In this report, income is defined as the cash income from all sources that respondents and their spouse or partner received during the previous year ("family income"). Nineteen percent of adults had a family income below $25,000, and 37 percent had a family income of $100,000 or more (figure 8).¹⁵

Although labor earnings were the most common source of income, many people had other sources of income. Two-thirds of adults and their spouse or partner received wages, salaries, or self-employment income (collectively referred to here as "labor income") (table 3). Fifty-five percent of all adults received non-labor income in 2023. (See table 3 for the full list of non-labor income sources considered).¹⁶ Some adults received both types of income: 50 percent of those with labor income also had some form of non-labor income. Additionally, as discussed in the "Retirement and Investments" section of the report, receipt of non-labor income was more common among retirees. While people received most forms of income at similar rates as in 2022, the share of adults who reported interest, dividends, or rental income was higher in 2023, up 3 percentage points from 31 percent in 2022.

Table 3. Sources of income

Changes in Income and Spending

Many people experienced a change in their family's monthly income and spending from a year earlier. Thirty-four percent of adults said their family's monthly income increased in 2023, while a higher 38 percent increased their monthly spending (figure 9). The shares of adults who said that their monthly income increased was slightly higher than in 2022, while the share reporting their spending increased was lower than in 2022.¹⁷ Consistent with that seen in most recent years, increases in income and spending were more common than decreases in income and spending in 2023.

The relationship between spending and income can suggest how closely people may need to watch their budgets and whether they have margin to save. In October 2023, 48 percent of adults reported spending less than their income in the past month, similar to the share in 2022 but down from highs reached in 2020 and 2021. The share of adults spending less than their income was also below the pre-pandemic levels in 2018 and 2019 (figure 10). Similar to 2022, 19 percent of adults said their spending exceeded their income, while the remainder (32 percent) said their spending and income were about the same.

Reflecting that they have fewer financial resources, lower-income adults were less likely to say they spent less than their income in the past month, compared with those with higher incomes. Thirty percent of adults with family income less than $25,000 said their spending was less than their income, compared with 65 percent of adults with income of $100,000 or more (figure 11).

Income Variability

The total level of yearly income may mask changes in income from month to month, and mismatches between the timing of income and expenses can lead to financial challenges.¹⁸ In 2023, most adults had income that was roughly the same each month, but 28 percent had income that varied at least occasionally from month to month, similar to previous years.

Income variability was related to the type of income people received. Adults who received only wages or other labor income were more likely to report their income varied from month to month (33 percent), compared with those with only non-labor income (12 percent).

Income variability continued to differ greatly by industry in 2023.¹⁹ For example, 47 percent of those working in the construction industry had varying monthly income, compared to 21 percent of those in the Armed Forces (figure 12).

Monthly variations in income may cause financial hardship for some families. In 2023, 10 percent of adults reported they struggled to pay their bills in the prior 12 months because their income varied, similar to 2022.

The likelihood of experiencing income variability and related hardship differed by education, race, and ethnicity. Adults with less education were more likely to experience hardship from varying income. Eighteen percent of adults with less than a high school degree said they had difficulty paying bills in the past year because their income varied, compared with 4 percent of adults with a bachelor's degree or more (table 4). Black and Hispanic adults also were more likely to experience income variability and related hardship, compared with White and Asian adults.

Table 4. Varying income and related hardship (by education and race/ethnicity)

 

References

 15. In the 2023 SHED, income is reported in dollar ranges rather than exact amounts. The income distribution in the 2023 SHED is largely similar to that from the 2023 March Current Population Survey. However, the SHED has a lower share with incomes less than $50,000 and a higher share with incomes of $50,000 or more. These deviations in the estimates may result from differences between the surveys in how income questions are asked. Return to text

 16. Non-labor income does not include tax credits such as the Earned Income Tax Credit or in-kind benefits. It also does not include the small number of respondents who reported receiving income but did not specify the source. Return to text

 17. The large share of adults who experienced increases in their income from year to year is consistent with findings based on Internal Revenue Service tax records data from Jeff Larrimore, Jacob Mortenson, and David Splinter, "Earnings Business Cycles: The Covid Recession, Recovery, and Policy Response," Journal of Public Economics 225 (September 2023): 104983, who also note that this is not unique to recent years. Return to text

 18. For additional information on monthly income variability, see Jonathan Morduch and Julie Siwicki, "In and Out of Poverty: Episodic Poverty and Income Volatility in the U.S. Financial Diaries," Social Service Review 91, no. 3 (2017): 390–421. Return to text

 19. This variability can come from any aspect of household income, however, and is not necessarily related to the person's income from the industry they work in. Return to text