The surprising post-pandemic drop in income inequality
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Middle- and lower-earners' inflation-adjusted incomes rose during the Biden years — but high earners saw their incomes fall.
- That's a surprising finding from one of the most thorough datasets on American household finances, released Friday morning by the Federal Reserve.
Why it matters: The data sheds granular new information on a much-contested question: What happened to Americans' real incomes during the post-pandemic period? It featured an exceptionally tight job market and the highest inflation in decades, followed by aggressive Fed rate hikes.
- The median American family's income rose 7% in inflation-adjusted terms between 2021 and 2024. But that masked significant differences among income brackets.
- The average real income of families in the top 10% of earners fell 14%, to $652,000 from $757,000 (both figures are 2025 dollars).
- That implies, contrary to a common narrative about the K-shaped economy, that income inequality fell during the post-pandemic period.
Yes, but: The story for wealth is very different. Families that were already wealthy — and tend to own stocks, houses and other assets — became much richer from 2022 to 2025.
- Among families in the top 10% of income, median net worth rose a whopping 31% from 2022 to 2025, compared with a 2% rise in net worth for the median family.
- Families in the bottom 40% of income actually saw their net worth decline slightly in that span.
The intrigue: The data, from the Survey of Consumer Finances, is collected and released every three years. Friday morning's release is the 2025 survey — but questions about income cover the preceding calendar year.
- As such, the income numbers compare 2024 with 2021 — conveniently capturing the change from the early part of the Biden administration to near its end.
Between the lines: While the compression in income inequality seen in this data may seem surprising, it aligns with other evidence that blue-collar workers saw bigger raises during the super-tight job market and inflationary episode of 2021 and 2022 than did higher-earning white-collar professionals.
- Moreover, in a footnote, the Fed researchers note that top earners tend to have income from volatile sources, mainly capital gains and business income.
- Big swings in those income sources among the highest earners can create outsized movement in the averages.
Of note: The survey also sheds light on how the Fed's aggressive interest rate hikes in 2022 and 2023, meant to bring inflation under control, hammered borrowers.
- The median debt payment-to-income ratio rose 2 percentage points from 2022 to 2025, reaching 15.4%.
- The share of families with debt payment-to-income ratios above 40%, a threshold for high debt obligations, increased to 8.6% from 6.5%, reaching a level last seen in the 2013 survey.
The bottom line: Low earners saw bigger percentage gains in their incomes' purchasing power amid the post-pandemic inflation than did high earners — but the rich got a lot richer at the same time.
