Board of Governors of the Federal Reserve System

Income

Income is central to most people's financial well-being. Recognizing this, the survey included a series of questions on income level and sources, as well as monthly income volatility.

Most parents with a child under age 18 received additional income in 2021 from the CTC. Parents used these monthly payments in a variety of ways, including saving them, spending them on food, and spending them on rent, mortgage, and utilities.

Most adults had income that was roughly the same each month. For adults with varying monthly income, 3 in 10 reported that the volatility caused financial challenges. Income variability was more likely to result in financial challenges among those with lower income.

Level and Source

Family income in this survey is the cash income from all sources, before taxes and deductions, that the respondents and their spouse or partner received during the previous year. Income is reported in dollar ranges and not exact amounts. Just over one-fourth of adults had a family income below $25,000 in 2021, and nearly one-third had $100,000 or more (table 4).

Table 4. Family income (by race/ethnicity)

Family income varied dramatically by race and ethnicity in 2021. Forty-three percent of Black adults and 40 percent of Hispanic adults had a family income below $25,000. This is at least twice the rate among White and Asian adults. Conversely, White and Asian adults were disproportionately likely to have family income above $100,000.

Labor earnings were the most common source of income, but many people had other sources of income as well. Sixty-seven percent of adults and their spouse or partner received wages, salaries, or self-employment income (collectively referred to here as labor income) (figure 8), matching the share from 2020. Yet, 59 percent of adults and their spouse or partner received non-labor income in 2021.¹⁷

The share of adults receiving unemployment income in 2021 (9 percent) remained higher than before the pandemic but was lower than in 2020, when the job losses caused by the COVID-19 pandemic peaked. Individuals who received income from unemployment insurance in 2021 reported that they were most likely to learn about their eligibility from their employer (45 percent), followed by their own internet research (32 percent).

Assistance from nonprofits and private sources—including financial support from a friend or family member living outside of their home—can also supplement family income. Fifteen percent of adults ages 21 and older received at least one type of assistance from private or nonprofit sources in 2021 (table 5). Nearly 1 in 10 adults received groceries or meals from a food pantry, religious organization, or community organization, down 2 percentage points from 2020. Seven percent of adults ages 21 and older received financial assistance from a friend or family member living outside of their home, essentially unchanged from 2020. On the other hand, 15 percent of adults provided support to others.

Table 5. Financial assistance received (by educational attainment)

Adults with less education were more likely to receive at least one type of assistance from private or nonprofit sources. More than 3 in 10 (34 percent) adults with less than a high school degree received this type of assistance, compared with less than 1 in 10 adults with at least a bachelor's degree.

Child Tax Credit

Starting in July 2021, most parents of children under age 18 saw their income supplemented by the enhanced CTC. Eighteen percent of all adults, and 70 percent of adults living with their children under age 18, reported receiving monthly CTC payments in 2021.¹⁸ An additional 5 percent of adults living with children under age 18 did not know if they received monthly CTC payments.

Parents who received monthly CTC payments most frequently saved the payments, spent them on their child, or used them for necessities. Saving was the most common use of the monthly CTC payments, with 43 percent of recipients saying they saved at least a portion of them. Other common uses were spending on their child (40 percent); spending on food (31 percent); and spending on rent, mortgage, or utilities (29 percent) (table 6).

Table 6. Uses for Child Tax Credit (CTC)

Respondents were also asked how they used the largest portion of the monthly CTC payments. Saving the monthly payment was again the most common response (36 percent), with many others saying that they spent the largest portion on their child or on rent, mortgage, or utilities.

The ways people used the CTC payments varied by income. Higher-income adults were most likely to save the largest portion of their credit, whereas lower-income adults were most likely to spend it on housing. For instance, 54 percent of recipients with income of at least $100,000 saved the largest portion of their credit, whereas only 18 percent of recipients with income less than $25,000 did so (table 7).

Table 7. Use for largest portion of Child Tax Credit (by family income)

Income Variability

Since many bills must be paid monthly, variations in monthly income can lead to financial challenges. Most adults had income that was roughly the same each month, but about 3 in 10 had income that varied from month to month. This share was essentially unchanged from 2020.

Since income variability can result from either dips or spikes in monthly income, the survey asked those who reported varying monthly income whether they struggled to pay bills as a result. Thirty percent of those who experienced varying monthly income, representing slightly less than 1 in 10 adults overall, said they struggled to pay their bills at least once in the past 12 months because of varying monthly income.

Lower-income adults were more likely to have varying monthly income and to report that they struggled to pay their bills at least once in the past 12 months as a result (table 8). Fifteen percent of adults with income less than $50,000 struggled to pay their bills because of varying monthly income. Among lower-income parents, an even greater 27 percent struggled to pay their bills because of income variability.

Table 8. Income volatility and related hardship (by family income, race/ethnicity, and disability status)

Adults with and without a disability were similarly likely to experience income variability. However, when those with a disability experienced such variability, it was more likely to lead to a hardship.

Income variability also continued to differ greatly by industry in 2021. Workers in the leisure and hospitality industry were the most likely to have varying monthly income (figure 9). These workers also reported the highest rates of hardship because of their varying income. However, the prevalence of income variability within the leisure and hospitality industry was similarly high both before and after the pandemic.

 

References

 17. Non-labor income is defined as income from interest, dividends, or rental income; social security (including old age and Disability Insurance (DI)); Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or cash assistance from a welfare program; unemployment income; or income from a pension. Non-labor income does not include Economic Impact Payments, tax credits such as the Earned Income Tax Credit, or in-kind benefits. Return to text

 18. This estimate corresponds to 27 million payments to 52 million children. Administrative data from the Treasury Department find that 36 million payments were made in December 2021 for 61 million qualifying children (U.S. Department of the Treasury, By State: Advance Child Tax Credit Payments Distributed in December 2021 (Washington, DC: Department of the Treasury, December 2021), https://home.treasury.gov/system/files/131/Advance-CTC-Payments-Disbursed-December-2021-by-State-12152021.pdf). The lower estimate of parents reporting the credit in the SHED suggests that some parents either did not know their family received the payment or did not know that it was the CTC. Return to text