why are Americans living paycheck to paycheck: Paycheck-to-paycheck nation: 1 in 4 US households struggling to stay afloat
Nearly 1 in 4 U.S. Households Will Switch from Paycheck to Paycheck by 2025
The research found that almost a quarter of households spend more than 95 percent of their income on basic needs; That figure underscores the growing gap between low- and high-income Americans, according to the report. “High-income and low-income households live in two different worlds,” said Joe Wadford, an economist at the Bank of America Institute, as quoted by CNN.
Low- and High-Income Americans: Growing Financial Segregation
For many, this struggle is exacerbated by stagnant wages. According to the report, after-tax wages for middle-income households increased by just 2% year-on-year in October, below the 3% inflation rate, while low-income households saw an increase of just 1%. In contrast, higher-income households experienced a 4% increase in wages, keeping them ahead of rising costs, according to CNN. According to CNN, the wages of low-income millennials increased by only 1%, while the rate for their higher-income peers increased by 6%.
ALSO READ: US stock market today: Dow down 181 points, S&P 500 up 0.3% and Nasdaq up 0.6%; Nvidia, Oracle, Palantir and Tesla lead tech recovery
Stagnant Wages Leave Many People Struggling to Keep Up with Rising Costs
According to CNN, 34-year-old Austin H. knows this fact very well and lives paycheck to paycheck with almost no savings. While Austin faces his own student debt, he also supports his partner, a veterinary student. According to the report, the construction company he works for will close, leaving him without a safety net in the coming months.
“Being 34 and living paycheck to paycheck with no savings, things are pretty terrible right now,” he said, according to CNN. “We want to own a house and start a family, but I don’t know how we’re going to put our feet on the ground.” ALSO READ: Trump plans major tariff cuts to cut rising grocery bills for millions of Americans
US Consumer Debt Signals Increasing Financial Distress
The economic crisis also manifests itself in consumer debts. Fitch Ratings reported that 6.65 percent of subprime borrowers were at least 60 days behind on car payments in October; It’s the highest level since tracking began in the 1990s, according to the report. According to CNN’s report, many households are making only the minimum payment by credit card, indicating increasing financial distress.
Economists Warn of Potential Slowdown in Consumer Spending
According to the report, economists warn that these pressures could have ripple effects on the broader economy. Gregory Daco, chief economist at EY-Parthenon, said households living paycheck to paycheck may spend cautiously, which could weaken the foundation of a consumer-driven economy, according to the CNN report.
Goldman Sachs Predicts Higher Unemployment Risk
Meanwhile, according to CNN, Goldman Sachs economists estimate that there is a 20% to 25% chance that unemployment in the US will increase by at least 0.5 points in the next six months; This shows that the risk of a slowdown in the labor market is increasing.
FAQ
How many Americans live paycheck to paycheck?
According to the report, approximately 24 percent of households in the United States have difficulty meeting their needs without making extra savings.
Who is most affected by living paycheck to paycheck?
According to the report, those most affected are low-income families and young adults.
