More Americans are living pay cheque to pay cheque even on $100,000 salary

Inflation and cost of living add to financial stressors as wages fail to keep up

Shoppers walk through a grocery store in Washington. AFP
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The share of Americans who say they live from one pay cheque to the next climbed last year, and most of the new arrivals in that category were among the country’s higher earners, a study has shown.

About 64 per cent of US consumers — equivalent to 166 million people — were living pay cheque to pay cheque at the end of 2022, according to the survey by industry publication and LendingClub Corp.

That is an increase of 3 percentage points from a year earlier, or 9.3 million Americans. And out of that group, about eight million were people earning more than $100,000 a year. More than half of that income cohort said they lived pay cheque to pay cheque in December, up 9 percentage points from a year earlier.

The numbers probably reflect growing strain on household budgets after the cost of living surged, wages often failed to keep up and pandemic savings got drawn down.

This year may bring further pressure, with less than half of the survey respondents saying they expect their incomes to keep pace with inflation.

“Prospects for consumer spending are cloudy,” said Lydia Boussour, senior economist at EY Parthenon.

“Elevated prices, eroded personal savings and increased reliance on credit point to weak consumer spending this winter.

“These dynamics will be exacerbated by negative wealth effects from lower stock prices and declining home values.”

Other indicators also point to some level of financial stress: The latest University of Michigan survey showed that consumer sentiment, while it has climbed from 2022 lows, remains far below pre-pandemic levels. Fourth-quarter economic growth data published last week highlighted a slowdown in household spending.

Inflation-adjusted disposable incomes remain below their levels at the start of the pandemic in 2020, indicating that consumers have seen no real income gains in three years, according to the Bureau of Economic Analysis.

The label does not necessarily mean that people are having trouble staying current on debt payments, but the survey suggests that a growing number are.

It found that 24 per cent of respondents had issues paying their bills in December. Among those earning more than $100,000 and living pay cheque to-pay cheque, the share rose to 16 per cent from 11 per cent a year earlier.

Updated: January 31, 2023, 8:39 PM