Why Americans Struggle to Keep Their Paychecks
Over time, rising costs and sluggish wage growth have left millions of Americans financially vulnerable, many of whom fall into the category known as “ALICEs” (Asset Limited, Income Constrained, Employed). According to United Way’s United For ALICE program, nearly 40 million families, or 29% of the population, earn above the poverty line but less than what’s needed to get by.
Inflation has taken a particularly heavy toll on low-income households, who spend a greater portion of their income on necessities. The pain of high prices has not been shared equally, and experts say that the lowest-paid workers have been hit the hardest.
“ALICE households, in particular, have borne the brunt of inflation,” said Greg McBride, chief financial analyst at Bankrate.com. “Even though we’ve seen wage growth on the low- to moderate-income scale, that’s also where inflation has hit the hardest.”
To make matters worse, the Federal Reserve’s interest rate hikes have further squeezed these households. Higher interest rates have increased borrowing costs, putting pressure on households already struggling to make ends meet.
The rising cost of living and stagnant wages have left many families relying on credit cards to cover expenses. Credit card debt has spiked to an all-time high, while the personal savings rate has fallen. Credit card delinquency rates have also climbed, reaching their highest level in 12 years.
“Keeping rates high is hurting the labor market and ALICEs’ ability to have higher wages,” said Stephanie Hoopes, national director at United For ALICE.
Lower-income households have fewer ways to reduce or change their spending habits and less in savings or investment accounts to fall back on. This situation leaves many families struggling to make ends meet and vulnerable to falling into poverty.
