Reduced inflation and wage increases haven’t stemmed the economic struggles of middle-class Americans. In fact, some middle-income earners say it’s harder than ever to put money away in savings.
Many ascribe this to stagnant wages and higher prices for things like gas, groceries, and utilities that began in 2021 and persist to this day.
Mary Lopez, a marketing manager and middle-income earner at Trusted Wedding Gown Preservation, a New Jersey-based business, said wage stagnation and a higher cost of living across the board has made it hard to save money and maintain a middle-class lifestyle.
“In terms of significant changes, my household, like many others, has felt the impact in areas like health care and housing,” Lopez told The Epoch Times via email.
“For instance, the rate of health insurance has spiraled upward and we’ve faced hikes in rent consistently. Many of my peers cite similar experiences, struggling to save amid these increasing costs.”
Wage Stagnation Versus Inflation
David Kindness, CPA and finance writer at Best Money, said wage growth hasn’t kept pace with rising costs.“Even with inflation cooling in certain areas, essential goods and services remain stubbornly expensive, eating up larger chunks of household budgets,” he told The Epoch Times via email.
“Rising grocery bills have made weekly shopping trips a source of financial stress. Many families, including my own, have had to rework their budgets to accommodate these increases, cutting back in other areas to stay afloat,” he said.
Ali Zane, a financial planner and founder of Imax Credit Repair, said that one of the most overlooked drivers of “paycheck-to-paycheck” living is the disconnect between wage growth and the actual cost of living.
“While inflation is blamed, stagnant wages over the past two decades are the root issue. Salaries may inch upward, but housing prices, which rose 30 to 40 percent in many regions since 2020, have far outpaced them. Add in the relentless climb of healthcare premiums and childcare expenses, and it’s no wonder families feel financially strapped,” Zane told The Epoch Times in a text.
But this isn’t a new problem. Real wage growth began to slow in the 1970s compared to overall economic performance in the United States, according to researchers at the Kellogg School of Management at Northwestern University.
Historically, real wage stagnation has been attributed to globalization and automation. Kellogg finance professor Efraim Benmelech disagrees.
With colleagues at the National Bureau of Economic Research, Benmelech points to what is known as “labor market concentration” as a hidden culprit. This is when having too few employers in a given industry creates a sort of unofficial salary price fixing.
“Many of my friends and clients have shared that they’re finding it harder to save, even those who had strong habits before,” Kindness said. “Unexpected expenses, like medical bills or car repairs, quickly eat into any money set aside for emergencies. With monthly costs already stretching their paychecks thin, putting away money for the future often feels out of reach.”
Kindness said he’s noticed that savings goals among his middle-class peers have shifted away from long term dreams such as buying a home or early retirement to simply having an emergency fund.
Paycheck to Paycheck
In October, Bank of America released a sobering study on American households living paycheck to paycheck. The results indicated the number of households barely making it between paychecks has increased across every income bracket since 2019, even those making more than $150,000 per year.Middle-income earners in the $51,000 to $75,000 range had the largest increase between 2019 and 2024, after households with less than $50,000, in which a quarter or more live paycheck to paycheck.
Moving up the income spectrum showed similar results, with roughly a quarter of all households living in this manner. Almost half of all respondents perceive themselves as living paycheck to paycheck.
The study noted that these households have much higher necessity spending, adding that most of the expenses are “likely unavoidable, as they relate to family and housing costs.”
Zane said that groceries have become a “silent tax” on the middle class, but pointed at rising utility costs as another big factor.
“Utility costs—often neglected in mainstream discussions—have become a household budget breaker. For families living in regions with harsh winters or sweltering summers, energy bills consume a more considerable monthly income than ever,” he said.
This is the case for Maria and Andrew in the Twin Cities area of Minnesota, who asked that The Epoch Times not use their real names. The couple said utilities are a major expense for their middle-class household, regardless of the season.
“We don’t turn on the heat until we have consecutive days below 40 [Fahrenheit]. Same deal in summer, the air conditioning doesn’t go on until it’s into the 90s,” Maria said.
She said that her kids complain about the house “always being cold” in the winter because even when she turns on the heat, the thermostat stays at a brisk 66 degrees Fahrenheit.
“Even doing that, our bill is over $500 in the winter. It’s not quite as bad in summer since we try not to run the air much, but you have to have heat in the winter here. We get months of consistently below zero temperatures. Heat is not a luxury,” Maria said.
Maria and Andrew say they are excited when an electric bill is less than $200. Over the past three years, Maria said she’s watched utility bills go up, a common complaint among locals in her area.
Andrew said, “We hear things from officials like, ‘we need to upgrade this infrastructure’ from officials and then get a nightmare bill down the road.”
When asked which expense reduction would make the most difference in their home, Andrew and Maria quickly said their weekly grocery bill.
“Since the pandemic, we’ve bought the same items in the same quantity and the same brands and watched our bill increase by 50 percent,” Maria said.
Andrew added, “Forget about eating out. That’s just for special occasions now.”
Many middle-class income earners have also cut back on what are now considered luxuries.
Kindness said, “My household scaled back on dining out and paused a couple of streaming subscriptions. These might seem like small adjustments, but they’re reflective of a larger pattern: people are prioritizing necessities and cutting what they view as luxuries.”
Lopez and her family have also restructured their financial priorities by trimming unnecessary spending.
“In the past year, we’ve consciously scaled back on non-essential expenses such as dining out, subscription services, and vacations to manage our finances. It’s sobering to note, but these once regular ‘luxuries’ are becoming increasingly occasional events,” she said.
“This shift isn’t unique to my family; it’s an adjustment many middle-income earners are reluctantly making due to escalating costs and financial uncertainty.”
Zane said middle-class households aren’t just cancelling Netflix or skipping restaurant splurges. They’re making more profound sacrifices in order to save money or, in some cases, just to survive.
“Parents are delaying children’s extracurricular activities, skipping preventive health care, and cutting back on professional development to avoid additional expenses. These choices aren’t sustainable and reflect a troubling downward spiral in financial stability,” he said.
By respondent age group, this is the case for 32 percent of Generation Z, followed by 31 percent of Millennials, 27 percent of Generation X, and 20 percent of Baby Boomers.
