A typical American household would earn $11,430 a year just to maintain the same standard of living it had in January 2021, just before inflation soared to a 40-year high, according to a recent analysis of government data. must be spent additionally.
These numbers mean that even though the economy remains strong in many ways, with U.S. inflation in decline and unemployment at a 20-year low, many households remain under financial pressure. It highlights what we are facing.of analysisRepublicans on the U.S. Senate Joint Economic Committee are studying the impact of inflation on a state-by-state basis, using government data such as the Consumer Price Index and Consumer Expenditure Survey.
Still, many Americans say they haven’t felt any such benefits, and this fall, even more reported to be struggling According to a CBS News poll, Americans are better off financially than they were before the pandemic. Inflation is a major reason why Americans express pessimism about the economy, despite bright spots such as higher wage growth in recent years.
The Biden administration called the analysis “flawed.” Citing federal labor statistics, the White House press secretary said per capita disposable income has increased by 16% since December 2020, just before President Joe Biden took office.
“There are 14 million more Americans now than when President Biden took office, and household disposable income has increased by about $21,000 since December 2020,” the spokesperson said in a statement to CBS MoneyWatch. said. “And what the Republicans in Congress who are pushing for this one-sided investigation refuse to admit is that their proposals would raise costs for the middle class, cut Social Security and Medicare, and give even more to wealthy special interests.” It means giving the tax of
Indeed, economists point to a number of issues related to the pandemic as the cause of high inflation, rather than the decisions of any particular political party. For example, spending bills signed by Presidents Donald Trump and Joe Biden put stimulus money into the hands of millions of Americans, while disrupting global supply chains and disrupting the workforce. The shortage caused the cost of goods and services to rise.
But even though inflation is now cooling rapidly, many consumers say they aren’t feeling it, with 60% of working Americans saying their income has decreased, according to a new Bankrate survey. ing. lagging inflation over the past 12 months
“On the edge”
Average hourly wages for workers have increased by a sharp 13.6% since January 2021, according to government data, but that’s less than the 17% rise in inflation over the same period. According to the Republican analysis, the main categories where consumers will need to spend more just to stay stuck are food, transportation, housing, and energy, which together account for nearly 80 cents of every additional dollar spent. .
“Middle- and low-income Americans are not doing well enough. They are living on the edge and vulnerable,” said Gene Ludwig, president of the Ludwig Institute for Shared Economic Prosperity (LISEP). On average, in 2022, people were almost $14,000 short of the income needed to cover basic necessities.
Where inflation is most severe
Nationwide, Colorado is the state with the most additional spending to maintain the same standard of living compared to 2021, requiring an additional $15,000 per household per year, JEC analysis finds did. Meanwhile, residents of Arkansas need to spend about $8,500 a year as a minimum to maintain their standard of living.
The difference in costs is related to regional economic disparities. For example, a typical home in Colorado costs an additional $267 per month compared to January 2021, while the increases in other states are much smaller, the analysis found.
Still, rising costs of living do not necessarily push people into financial hardship. Ludwig’s group recently found that in some expensive cities, best quality of life This is primarily due to the higher incomes available to workers in these cities.
Inevitably, low-income households spend more of their income on necessities than higher-income Americans, making them more susceptible to inflation.and Until recently, Wages for low- and middle-income earners have not kept up with the wage increases enjoyed by the nation’s highest earners.
“Food and basic expenses are rising more than other costs,” Ludwig said. “Thanksgiving dinner costs the same for low-income and high-income Americans, but it represents a larger portion of spending for low-income Americans.”
Indeed, inflation is cooling rapidly, with prices rising at an annual rate of 3.2% in October, much lower than the 9.1% pace recorded in June 2022. But local inflation continues to hit consumers, including fast-food restaurants like McDonald’s. , where Big Mac is now It costs 10% more From December 2020.
Although inflation may be calming down, many consumers may not feel very reassured as most prices have not come down (with the notable exception of gas prices, which are notoriously volatile and have fallen over the past 10 years. (down about 5% in 2018). Consumers are still paying more. Add to that price increases were locked in when prices spiked in 2022 and earlier this year, albeit at a slower pace.