Income data in this report for 1985 are the first estimates based entirely on households selected from the 1980 census-based sample design. Estimates by type of residence categories such as metropolitan, nonmetropolitan, farm, and nonfarm, which were omitted from the 1984 report because of the mixed 1970 and 1980 census sampling frame used for the March 1985 CPS, have been resumed in this report. The residence categories reflect metropolitan areas defined as of June 1984. In addition, the March 1986 CPS income supplement was revised to allow for the coding of larger earnings amounts on the questionnaire. A description of this change and its effect on income estimates is in the section discussing the revised earnings question.

Median household income in 1985 was $23,620, an increase of 5.4 percent over the 1984 median of $22,420, according to results of the March 1986 Current Population Survey (CPS) conducted by the Bureau of the Census. After adjusting for the increase in consumer prices between 1984 and 1985, real median household income increased by about 1.7 percent.¹ The 1985 median income was $24,910 for White households, $14,820 for Black households, and $17,470 for Hispanic households. White and Black households showed an increase in real income between 1984 and 1985, but the observed change for Hispanic households was not statistically significant.

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¹ Changes in real income refer to comparisons after adjusting for inflation. The percent change in prices between 1984 and 1985 was computed by dividing the annual average Consumer Price Index (CPI) for 1985 by the annual average value of the CPI for 1984. See table A-1 of appendix A for CPI's from 1947 to 1985.