A recent analysis reveals that Americans need an additional $11,434 annually to maintain the same standard of living they had in January...
A recent analysis reveals that Americans need an additional $11,434 annually to maintain the same standard of living they had in January 2021.
According to a CBS News poll, the economic ripples from the inflation surge and ongoing inflation crisis that began in 2021 are still affecting American households. More Americans are facing financial challenges now than before the pandemic.
Despite a slowly receding inflation rate, a two-decade low joblessness rate and what may look like an improving economy, many families still find themselves financially squeezed and struggling to bridge the gap between wage gains and the rising cost of essentials.
The number of individuals describing themselves as "living comfortably and able to save" remains lower than in the summer of 2019. Similarly, those reporting meeting expenses with a little left over have not returned to pre-pandemic levels. Americans facing financial struggles increased by nine percent compared to four years ago, with half stating they are either just meeting or unable to meet their expenses.
People earning between $50,000 and $100,000 a year are experiencing a significant shift in how they describe their financial situation. Just a little over half of them now claim to have some money left after covering their expenses. This represents a 19-point decrease from what individuals in this income range reported in 2019.
A recent analysis by Republican members of the U.S. Senate Joint Economic Committee points out that inflation on food, transportation, housing and energy accounts for nearly 80 cents of every additional dollar spent. This, in turn, has imposed heavier financial burdens on consumers.
In a separate research conducted by the Ludwig Institute for Shared Economic Prosperity (LISEP), the income required to cover basic needs fell short by almost $14,000 on average in 2022. However, the analysis conducted by the Joint Economic Committee reveals regional disparities.
The analysis of the committee found that Colorado households face the highest additional expenditures, requiring an extra $15,000 in 2022 to maintain their standard of living from the previous year. Residents in Arkansas experience a comparatively lower burden, with the need for only about $8,500 extra.
Low-income households are more affected by inflation
Gene Ludwig, Chairman of the LISEP, stated that middle- and low-income Americans are now "living fragilely on the edge." Lower-income households feel the impact of inflation worse as they allocate a larger share of their income to basic necessities.
Recent data from the Bureau of Labor Statistics indicates that a typical worker takes home $3,308 per month after tax and benefits deductions.
However, the Council for Community and Economic Research stated that one must also pay monthly rent, which is about $2,029 based on Redfine or a $1,957 mortgage payment per month for a 2,400-square-foot house in the first quarter of 2023.
Aside from housing, consumers also have monthly expenses for food, with an average of $690.75 in their budget and $96.42 on out-of-pocket health expenditures. Consequently, the total monthly expense for renters is estimated to rise to $2,816.17, while homeowners face an average monthly expense of $2,744.17. These figures, however, do not include other essential costs like transportation, child care, and debt payments.
The 13.6 percent increase in average hourly pay since January 2021 lags behind the 17 percent surge in inflation during the same period. The breakdown of these expenses underscores the financial challenges faced by lower-income workers, who are caught in the crosshairs of stagnant wages and a rapidly increasing cost of living.
No comments