(The Hill) — A quarter of American households are living paycheck to paycheck, according to a new analysis from Bank of America.
Slow wage growth has contributed to an increase in households with limited savings. Lower-income and middle-aged households bear the brunt of rising costs.
The number of middle-aged households living paycheck to paycheck has increased compared to Generation Z and the Silent Generation — older than baby boomers — whose conditions have relatively stayed the same.
Higher-income millennial households saw their average wages grow 5 percentage points faster “than the rate of lower-income households in the same generation,” according to the analysis, released Monday. Higher-income Gen Xers have outpaced their lower-income counterparts by 4 points. And higher-income baby boomers “have seen wage gains, while their lower-income peers are seeing declines.”
“Consequently, these higher-income cohorts are more able to absorb the recent reacceleration in inflation due to their outsized wage growth, while lower-income households’ wage growth has not kept pace,” it added.
For the report, households were defined as living paycheck to paycheck if, in the quarter, their necessity spending exceeded 95 percent of their income.
The bank found that the number of households in the Northeast and Midwest living paycheck to paycheck increased using year-over-year data, while it decreased for those living in the South and West.
The bank’s analysis said the latter regions had lower inflation rates, contributing to more financial stability. Still, those areas have households that are more likely to be facing monetary strain.
Looking across the U.S., Bank of America wrote in its analysis that it saw that the Southern census divisions — notably Delaware, the District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia — and Western divisions — especially Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming — had the “highest share of households living paycheck to paycheck.”
“Meanwhile, the divisions with the lowest share are in the Northeast (particularly New Jersey, New York and Pennsylvania) and Midwest (namely Illinois, Indiana, Michigan, Ohio and Wisconsin).”
The financial institution used internal transaction data for the macroeconomic views in the report.
Transactions tabulated as necessity spending ranged from child care, external credit card payments, gasoline, general retail, grocery, housing (mortgage/rent), insurance, cable TV/broadband, public transportation, tax payments, vehicle costs and payments.
Bank of America defined income as regularly recurring payments into accounts, such as payroll, social security, unemployment insurance pensions and annuity income.