One-third of U.S. living paycheck to paycheck
Even $100,000 earners as household debt, health costs rise
Rising costs and stagnant wages have one-third of U.S. workers chasing the next paycheck. (Shutterstock)
By Ted Cox
Almost a third of U.S. workers are living paycheck to paycheck — even those making $100,000 a year — according to a new survey released last week.
Salary Finance surveyed 2,700 U.S. workers at businesses employing more than 500 people and found that 32 percent typically run out of money before receiving their next paycheck.
That was consistent for those making more than $100,000 a year, where 31 percent said they “regularly experience a budget shortfall before payday,” according to the study.
“This is not just an issue for people at the lower end of the income spectrum," Dan Macklin, Salary Finance's U.S. chief executive officer, told CNBC.
The survey blames the rising cost of food, housing, education, and medical expenses, which is outpacing wages. CNBC reported: “Over the past year, basic costs increased by 2.3 percent, according to the Bureau of Labor Statistics's Consumer Price Index. The cost of medical care rose 4.6 percent in 2019, the largest year-over-year increase since 2007. … Housing also jumped 3.2 percent last year, while education expenses rose 2.1 percent and food prices increased about 1.8 percent.”
At the same time: “Real wages effectively remained stalled last year, showing only a 0.2 percent year-over-year increase, according to the PayScale Index.” And the data were worse over the long term, with Payscale finding that median wages, when adjusted for inflation, actually declined 9 percent since 2006.
President Trump’s persistent attempts to sew chaos in the Affordable Care Act can be blamed for the largest annual increase in health-care costs since before the Great Recession, but the New York Federal Reserve warned of another danger last week in the form of rising household debt encouraged by the Trump administration’s low interest rates at the Fed.
“Total household debt rose by $193 billion during the last quarter of 2019, continuing a five-year upward trend,” according to a CNN story on the New York Fed report. “It now stands $1.5 trillion higher, in nominal terms, than the pre-recession peak of $12.7 trillion reached in 2008.” Household debt rose over $600 billion nationwide last year alone.
Some of that’s driven by home buying as mortgage rates dropped below 4 percent last August, but the New York Fed Bank reported “growth seen in new credit extensions across debt types.”
Credit-card debt rose $57 billion last year, with the bulk of that, $46 billion, coming in the fourth quarter, no doubt fueled by holiday shopping. At the same time, according to the report, “transitions into delinquency among credit-card borrowers deteriorated in the fourth quarter.”
“The data also show that transitions into delinquency among credit-card borrowers have steadily risen since 2016, notably among younger borrowers,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed.
According to CNN: “Student-loan debt also continued to rise in 2019, topping $1.5 trillion — but its growth has slowed. Student debt climbed by $51 billion last year, well below the $114 billion increase reported in 2013. About 11 percent of the student-loan debt was more than 90 days delinquent — about the same as it was during the previous quarter.”
It’s no better for those working the fields as farmers. FarmWeekNow reported Monday that the U.S. Department of Agriculture expects no relief for farmers this year who are already trying to recover from last year’s down harvest resulting from late spring planting brought on by heavy rains and flooding and a fall harvest shortened by an early heavy snowfall.
“USDA predicts input costs and farm debt will rise this year, which could lead to further deterioration of working capital and a slightly higher debt to asset ratio,” FarmWeekNow reported. “Total farm production expenses are forecast to increase by $10.4 billion to $354.7 billion this year. Spending in most categories, especially feed and hired labor, are expected to increase while interest expenses could ease, according to USDA.”
“It will almost undoubtedly result in further increases in farm debt, which leads to an increase in the average debt-asset ratio for Illinois farms, and less working capital,” said Mike Doherty, Illinois Farm Bureau senior economist and policy analyst.
CNBC reported it was all increasing “financial stress” across all areas and income levels, adding, “Financial stress is very prevalent today, with 42 percent of working Americans experiencing it. It’s a percentage Macklin finds ‘extremely worrying.’”
“This is also true for Illinois and highlights the stress and anxiety hard-working Illinoisans feel under a system that isn’t fair and an economy that isn't working for most of us,” said Harish Patel, director of Economic Security for Illinois, a group advocating expansion of the Earned Income Tax Credit as a way to achieve many of the aims of Universal Basic Income. “We have an opportunity in Illinois to bring some relief by bringing tax equity, expand and increase our state Earned Income Credit and bring cash-transfer programs that provide economic security and flexibility for families.”
Salary Finance recommended that people living paycheck to paycheck should make regular, automatic deposits to savings accounts to build up a cushion. But CNBC pointedly added: “That may be easier said than done for those who are routinely running short on cash. Almost half of working Americans surveyed by Salary Finance, 48 percent, say they don't have any money specifically set aside for emergencies.”