One in four U.S. households is living paycheck to paycheck and struggling to get by, according to a new Bank of America Institute analysis.
Researchers analyzed internal data from millions of consumers and found about a quarter of households spend more than 95% of their income on necessities such as groceries, housing, gas, child care and utilities. The percentage of Americans who are spending over 95% of their income on necessities has increased the last two years.
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Living paycheck to paycheck was more likely to impact low-income households. Nearly 30% of low-income households were living paycheck to paycheck, while less than 20% of higher income households spent over 95% of their incomes on necessities.
The report highlights what economists call a “K-shaped economy,” in which affluent Americans are faring far better than those at the bottom. Another sign of this trend is the Federal Reserve has reported that credit card debt and delinquencies have increased in the last year.
"Lower-income households’ wage growth has slowed," the report states. "This cohort saw the strongest gains in 2021-22; however, that momentum has recently declined. At the same time, inflation has reaccelerated, further widening the gap between income and expenses for these households."
