The rising cost of living, particularly in essential goods such as food, housing, and transportation, is disproportionately affecting low-to-middle income Americans, according to recent data published by J.P. Morgan.
The bottom 20% of American workers are reported to be spending 80% of their earnings on essential goods. In contrast, the highest income quintile spends only 55% of their earnings on these necessities. This disparity exists despite the fact that real wages are growing faster for lower-income Americans, according to an analysis published by Business Insider.
As many workers grapple with economic challenges, it’s crucial to consider the broader implications for the future of work, including potential shifts in where people choose to live and work. While the cost of living continues to consume a significant portion of lower-income wages, will workers be less inclined to pursue opportunities that require relocating to cities or states with higher living costs? Conversely, there might be a trend where individuals seek employment in states with a lower cost of living, leading to a potential demographic shift.
Wage increases are not keeping pace with the escalating cost of living. A notable 59% of low-income consumers reported not receiving a salary increase, in contrast to 34% of high-income consumers. Even among those who did receive a raise, less than 10% felt that it adequately compensated for the rising costs of essential goods.
As the cost of essentials becomes a larger burden on workers’ income, many might find it economically beneficial to relocate to areas where their wages stretch further. States that offer a more affordable lifestyle might see an influx of workers, while those with high living costs might experience an outflow. Such migration patterns would have broader implications for local economies, housing markets, and job availability in both high and low-cost areas.
The data also suggests that the current economic situation might be a precursor to more economic challenges ahead. With nearly half of Americans planning to cut discretionary spending in the next year and credit card debt on the rise, the data might be revealing that many are bracing for further economic hardships. Some economists even predict a possible recession by 2024, which could exacerbate income inequality and widen the racial wealth gap.
The rising cost of living, especially for essential goods, is a pressing concern for the American workforce. The decisions made by people in response to these economic pressures will shape the labor landscape in the coming years.