What is the Average Salary in the U.S.?

The average salary in the U.S. is more than $50,000 and has steadily risen for decades. Inflation, labor shortages and wage disparity continue to increase the mean wage. To determine where your salary falls within the average, consider your financial needs, plus factors like your location, industry and position.

By Lora Korpar

Salary is one of the most important factors in the job search. Loving your work is the goal, but making enough to survive is a necessity. And that amount depends on various factors.

The average wage index in the U.S. was $55,628.60 in 2020, according to the Social Security Administration (SSA). This is an increase of almost $14,000 just since 2010. The upward trend is continuing. The Bureau of Labor Statistics (BLS) reported the country’s mean annual wage across all occupations was $58,260 in 2021.?

However, a "good salary" has different definitions. It varies dramatically depending on industry, inflation and location, among other factors.

So how do you make sense of the numbers? And how do you determine what a good salary is for you?

I spoke with Alan Benson, an associate professor at the University of Minnesota’s Carlson School of Management, plus Jonas Johnson, director of research and operations at the Economic Research Institute, to discuss the causes of wage growth, the relationship between wage growth and inflation and what constitutes a “good salary.”

Reasons for Widespread Salary Growth

The SSA data tracks the average wage index to 1951 when it was $2,799.16. The wage increased every few years by about $1,000, eventually leading to today’s number of more than $58,000.

Benson and Johnson said several factors contribute to widespread wage growth. A primary one is inflation. Johnson said most companies budget for salary increases to keep pace with inflation.

“There is a baseline of compensation increase that we see over time, and generally speaking it tracks with inflation,” Johnson said. “Of course, right now we're in a different time with higher inflation. And so right now compensation growth is not tracking with the rate of inflation even though it is increasing.”

“Labor market slack” is another factor that can pressure companies to increase salaries. Johnson compared labor market slack to walking a dog. Your leash has slack when the dog is walking by your side. But if the dog sees something and runs ahead, the leash has no slack, and the dog will pull you forward.

Everyone needs a job during periods of economic downturn like in 2008, so there was no pressure to increase salaries. But labor shortages can pull employers toward increasing their wages to fill their open positions.

“That's where we are right now,” Johnson said. “The open jobs rate is 6.9%. And the 10-year average of the open jobs rate is 4.1%… We're at a point right now where more organizations are looking for employees than employees who are available to work [are looking for jobs]. And as a result of that, it's currently putting an upward pressure on compensation.”

“[A labor shortage] gives workers more bargaining power to demand higher wages in order to check them into those positions,” Benson added. “So I think that wage competition when there's a tight labor market and inflation is going to lead to larger wage growth.”

Benson said it is important to differentiate between mean and median average salaries. The BLS reported the median wage in 2021 was $22 per hour, which is just over $45,000 annually. This is $13,000 less than the mean.

“Median household income has been increasing at a slow pace,” Benson said. “There's been higher wage gains at the top of the income distribution. And so sometimes you'll see articles referring to an average wage growth versus median. That's because there's actually a difference because the distribution of the wages has gotten larger over time and it pulls up the average.”

Salary Growth and Inflation

Benson and Johnson said we are in a period in which wage growth is struggling to match the inflation rate. The Federal Reserve increased interest rates to try to curb inflation without plunging the country into a recession. But inflation will take time to combat.

Benson said inflation is frustrating for workers because they feel they are losing money even if their salaries have increased.

“We've seen how nurses in Minnesota and railroad workers are negotiating over these really contentious labor deals, perhaps over the course of several years,” Benson said. “A 20% wage increase over three years could be historically large in nominal terms. But when you actually look at the spending power and you adjust those wage increases for inflation, then they could actually be wage decreases.

“People are getting their annual wages and they see that your wages have increased 4% and then you go to the grocery store, the movie theater or the restaurant and everything costs 10% more… It can feel very much like you've got a pay reduction. And I think that's really the pain that's hitting a lot of workers and consumers right now.”

This phenomenon is called the “wage-price spiral.” Johnson described this theory as “a cycle where wage growth and inflation are pushing each other up.” However, Johnson doesn’t think the U.S. is at that point.

“I would suspect that we're not going to be seeing increases in wages turning around and pushing up inflation based off of where we are because we are currently sitting at a deficit of real income over the past year,” Johnson said. “Wages have not kept up with inflation, so there is a bit of a buffer for wages to increase until we get to the point where people are maintaining the same spending power as they were prior to the high inflation. So my suspicion is that we're not going to see wages pushing up inflation further. Whether or not that actually happens, that remains to be seen.”

How Your Salary Fits Into the Equation

Looking at wage data can be overwhelming without proper context. Benson and Johnson said determining a “good salary” depends on various factors like your location, occupation and personal financial needs.

“The funny thing about a good salary is that most people consider ‘rich’ to be about twice what they're actually making, which really means that for every person, that number is something different,” Benson said.

Consider your financial needs. A parent of four with unpaid student loans living in New York City might prioritize a higher salary more than a single person without debt living in a small town.

“Certainly the ability to purchase housing and purchase food, educating themselves and their children — these are kind of the hallmarks of the American dream,” Benson said. “But of course, all of these things are expensive and are all very labor-intensive goods.”

The revenue your organization generates and your level within the organization also determine salary.

“Once you start getting up into top executives, say into CEO, the geography becomes far less important and the industry becomes more important,” Johnson said. “And much larger organizations may be expected to pay their executive structure more than in smaller organizations.”

This combination of personal finances, industry, location, company and leadership level will help you determine where your salary fits and give you leverage if you need to negotiate for a higher salary.

Top Takeaways

What to Know About U.S. Salaries

• The United States average salary has steadily increased across the decades due to inflation, labor market slack and wage disparity.
• Inflation is currently rising faster than wages.
• Increasing wages risks the “wage-price spiral,” where salaries and inflation push each other.
• Evaluate factors like your location, industry, company and position to determine the salary you should be making.