A new report shows how close American households are to the financial edge

Affordability is defined by comparing the rising costs of essentials with family incomes rather than focusing only on inflation. In 2024, 45.5% of U.S. households did not earn enough to cover necessities. A $1,000 increase in annual cost of living would leave about 3 million additional households unable to make ends meet. The gap between inflation and wages contributes to this precarity, with wages rising 1.3% in 2024 versus 2.9% inflation. Household income data for every U.S. county was compared with estimated costs of necessities such as food and transportation. Housing, healthcare, and childcare are major structural costs that families have limited control over. When the gap widens, families skip meals, increase debt, and delay medical care, with differences across states and racial groups.

"Affordability has been a politically potent word, but an ill-defined measure of financial pain, often used as a reference to inflated prices. But new research from the Brookings Institution released Wednesday describes affordability by comparing the rising costs of essentials against family incomes. By that measure, the report found, in 2024 45.5% of U.S. households did not earn enough to cover their necessities. The report concluded that a mere $1,000 hike in the annual cost of living would leave another 3 million households unable to make ends meet."

"That precarity is partly due to the gap between inflation and wages. In 2024, national wages saw just a small 1.3% bump, well below the rate of inflation of 2.9% that year, according to the Census Bureau. "My main takeaway is that when we talk about affordability, we've been focusing on inflation. But there's the income side of the story that we often do not talk about," said Andre Perry, the director of Brookings' Center for Community Uplift."

"For the new report, the Brookings researchers gathered household income data for every county in the U.S. and compared those incomes with the estimated costs of necessities like food and transportation in those places. Housing, healthcare and childcare are especially large chunks of household budgets that families have little control over, said Hannah Stephens, a senior research assistant at the center. "In order to actually solve affordability, we have to deal with these larger, most structural costs that are harming households," she said."

"For some families, closing that gap between essentials and income has meant skipped meals, increased debt and delayed medical care, the report found. Those decisions are playing out across the country, though the data showed some divides across states and racial groups. According to the paper, in 2024, more than 50% of families in New York state could not manage on their incomes."

Read at www.npr.org