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REPORT Squeezing the Budget: Two Decades of Data Reveal Widening Disparities as Spending for Basic Needs Outpaces Income Growth for Lower-Income Households
REPORT Squeezing the Budget: Two Decades of Data Reveal Widening Disparities as Spending for Basic Needs Outpaces Income Growth for Lower-Income Households
Income inequality has widened in recent decades. Inflation, and therefore cost, for housing, transportation, food from groceries, health care, and child care have risen dramatically. At the same time, wage increases failed to keep up with rising costs, particularly for lower-income households, whose wages have stagnated. This analysis finds that lower-income households have less income than they need to survive and are worse off than they were two decades ago. In contrast, higher-income households have seen large income increases and only moderate increases in spending on basic need categories, allowing these households to be better off than they were two decades ago.
- Rising spending on basic needs has outpaced income growth over the past two decades among lower-income households, which now typically spend all their income on essential categories.
- Between 2004 and 2024, the median incomes of lower-income households increased by just 5.5%, while their spending on essential categories increased by 14.5%. As a result, the share of their income spent on those essential categories has increased by 8.5% (from 87.5% in 2004 to 95.0% in 2024).
- In contrast, income increases outpaced spending increases among higher-income households, which now typically spend less of their income on essential categories than they did two decades ago.
- Over the past two decades, incomes of higher-income households increased by 18.2%, while their spending on essential categories rose more slowly, by 6.7%. As a result, the share of income spent on essential categories in higher-income households has decreased by 9.7% (from 40.2% in 2004 to 36.3% in 2024).
Without sustainable policy changes, lower-income households will fall deeper into financial danger and income inequality will continue to grow. Policy makers should:
- Boost incomes for lower-income households by increasing wages, strengthening workers’ protections, and expanding refundable tax credits.
- Expand basic need programs and reverse cuts to SNAP and Medicaid.
- Make robust, systemic investments in public goods through universal child care, public housing, preventing corporate price gouging, expanding public transit, and universal access to low-cost health coverage and care.
- And ensure the wealthiest and corporations pay their fair share of taxes so that we can all thrive.
