Board of Governors of the Federal Reserve System

Income

A sizeable share of adults said their family's monthly income increased in 2022 compared with a year earlier. However, the share of adults who said their spending increased from the prior year was even greater. Consistent with these changes in income and spending, fewer adults appear to have margin in their family budgets. The share of adults who said they spent less than their income in the month before the survey fell below the level it had been before the pandemic.

Level and Source of Income

In this report, family income is defined as the cash income from all sources, prior to taxes and deductions, that respondents and their spouse or partner received during the previous year. Thirty percent of adults had a family income below $25,000, and 32 percent had a family income of $100,000 or more (figure 9).¹⁴

Labor earnings were the most common source of income, but many people had other sources of income. Nearly 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-three percent of all adults received non-labor income in 2022.¹⁵ Some adults received both types of income: 48 percent of those with a 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.

Table 3. Sources of income

While people received most forms of income at similar rates as in 2021, receipt of unemployment assistance dropped markedly. In 2022, the share of all adults receiving unemployment income returned to the pre-pandemic level of 2 percent, dropping from the elevated levels of 14 percent in 2020 and 9 percent in 2021. This decline in the receipt of unemployment assistance reflects both the lower rate of unemployment in 2022 and the termination of enhanced unemployment assistance programs that were put into place during the pandemic.

In addition to the income sources discussed above, some adults relied on cash or in-kind assistance from nonprofits and private sources—including financial support from a friend or family member living outside of their home. Fifteen percent of adults received at least one type of assistance from private or nonprofit sources in 2022. Specifically, 9 percent of all adults received free groceries or meals through a food pantry, religious organization, or community organization, 2 percent received financial assistance from a religious or community organization, and 8 percent received financial assistance from friends or family not living with them. These rates are nearly identical to those reported in 2021.

The likelihood of receiving financial support varied by age, with young adults being more likely than older adults to receive assistance. For those age 18 to 29, 15 percent received financial assistance from friends or family—over twice as high as the share of those age 30 and older who received this type of financial assistance (7 percent).

Changes in Income and Spending

Many people experienced a change in their family's monthly income and spending from a year earlier. Thirty-three percent of adults said their family's monthly income increased in 2022 compared with the prior year, while 40 percent increased their monthly spending (figure 10). This share of adults who reported an increase in monthly spending was 14 percentage points higher than the share who reported this in 2021. While some adults saw both their spending and their income increase, 23 percent of adults said that their spending had increased but their income had not.

In October 2022, just under half of adults reported spending less than their income in the past month, down from highs reached in 2020 and 2021, and below the pre-pandemic levels in 2017 to 2019 (figure 11). Nineteen percent said their spending exceeded their income, while the remainder (32 percent) said their spending and income were about the same.

Pullbacks in spending in the early part of the pandemic, coupled with fiscal support that many families received in 2020 and 2021, may have given some households more margin in their budgets over this period. In 2022, price increases affected family budgets for many adults and may have contributed to the decline in the share of adults who spent less than their income in the prior month. (See the "Expenses" section of this report for more on the effect of price increases.)

Likely reflecting their higher income and stronger financial circumstances generally, adults with more education were more likely to say they spent less than their income in the past month. Thirty-two percent of adults with less than a high school degree said their spending was less than their income, compared with 58 percent of adults with a bachelor's degree or more (figure 12). However, adults with more education also saw a larger drop between 2021 and 2022 in the share spending less than their income.

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.¹⁶ In 2022, most adults had income that was roughly the same each month, but nearly 3 in 10 had income that varied 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 sources of labor income were more likely to report their income varied from month to month (33 percent), compared with those with only non-labor income (13 percent).

Income variability continued to differ greatly by industry in 2022.¹⁷ Workers in the leisure and hospitality industry were the most likely to have varying monthly income (figure 13). The high rate of income variability for leisure and hospitality workers has occurred since before the pandemic.

Monthly variations in income may cause financial hardship for some families. In 2022, 10 percent of adults reported they struggled to pay their bills in the past 12 months because their income varied, up from 9 percent in 2021.

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. Twenty-one 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 5 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

 

 14. In the 2022 SHED, respondents were asked to provide the amount of their income in dollars, with a follow-up question using income ranges for those who did not give a response. The income distribution in the 2022 SHED is broadly similar to that from the 2022 March Current Population Survey. However, the SHED has a slightly higher share with incomes less than $25,000 or over $100,000 but fewer with incomes between $25,000 and $99,999. These deviations in the estimates may result from differences between the surveys in how income questions are asked. Return to text

 15. Non-labor or nonwage 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 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

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

 17. 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