Rising Costs and Wage Stagnation Leave Many U.S. Families Struggling

Affordability is often discussed in the context of rising prices, but it encompasses more than just inflation. A recent report from the Brookings Institution examines affordability by comparing the increasing costs of necessities with family incomes. Their findings indicate that by 2024, 45.5% of U.S. households could not afford basic needs.

The study reveals that even a $1,000 rise in annual living costs would push an additional 3 million households into financial insecurity. A significant factor contributing to this situation is the disparity between wage growth and inflation. National wages saw a modest increase of 1.3% in 2024, while inflation rose by 2.9% according to the Census Bureau.

Andre Perry, director of Brookings’ Center for Community Uplift, emphasized the importance of considering both inflation and income when discussing affordability. The report utilized household income data from every U.S. county to compare it with estimated necessities’ costs, such as food and transportation. Housing, healthcare, and childcare are especially burdensome expenses that families struggle to control.

Hannah Stephens, a senior research assistant at the center, stated that addressing these large structural costs is crucial to solving the affordability issue. Families are making tough choices such as skipping meals, accumulating debt, and delaying medical care as a result.

The report highlights regional disparities, with over 50% of families in New York state unable to sustain themselves on their current incomes in 2024. Meanwhile, more than 60% of households in Washington, D.C., could afford necessities, yet Black residents faced significant challenges, lagging more than 20 percentage points behind the district’s baseline. Conversely, Hispanic households exceeded the city’s baseline by 3 percentage points.

The challenge is not new. For most years between 2014 and 2024, over 40% of households struggled to afford necessities. Exceptions occurred in 2021 and 2022 when federal stimulus checks and aid during the COVID-19 pandemic temporarily relieved financial pressures. However, the economic situation worsened in 2022 as inflation peaked and federal assistance waned.

The Brookings report notes that with additional costs, such as a $1,000 increase in annual expenses, families are further strained. Gas prices surged by 50% following the onset of the conflict with Iran, and the Consumer Price Index saw a 3.8% rise from the previous year in April, surpassing the Federal Reserve’s target.

The Federal Reserve Bank of New York’s survey indicates that food insecurity is at pandemic-level highs, with many families relying on food banks and government aid or skipping meals altogether. Although larger tax refunds resulting from a Republican tax and spending bill bolstered consumer spending, the unequal income growth persists.

Between 2025 and 2026, incomes increased significantly for higher-income families by 6%, but only by 1.5% for lower earners. This disparity contributes to the notion of a “K-shaped economy,” where income and spending grow for the wealthy but stagnate for others.

The Brookings report identifies that raising workers’ wages by $10 per hour could enable 38 million households to manage their costs. Despite being a challenging goal in a nation where the federal minimum wage remains at $7.25 since 2009, Perry believes it is achievable.