Millions of US Workers Are Functionally Poor: Recent Study Reveals

Facts & Figures

According to a Bankrate survey conducted in mid-May 2024:

• 34% of US workers report living paycheck to paycheck, with little to no money left for savings after covering their monthly expenses
• 60.1% of Americans are in the labor force
• 59% of US adults are uncomfortable with their level of emergency savings
• 27% of US adults have no emergency savings at all

These figures highlight the financial fragility of many households struggling to make ends meet amidst rising costs of living.

The Current Situation

The survey indicates that lower-income workers are particularly vulnerable, with those earning $50,000 a year or less more likely to live paycheck to paycheck than their higher-earning counterparts. Inflation has significantly eroded purchasing power, making it difficult for workers to keep up with everyday expenses. Despite a cooling in inflation rates, many Americans feel their wages are not keeping pace with the rising cost of living. All of this indicates that there is, functionally, a significant decline in wages for Americans whose pay hasn't kept up with inflation.

Federal data shows that while average wages grew 3.9% year over year in June, consumer prices grew by 3% during the same period. This discrepancy has left many workers feeling pinched as rising costs for essentials like housing, food, and transportation continue to outpace wage growth. The Bankrate survey also revealed that 56% of workers plan to look for a new job in the next 12 months, primarily due to dissatisfaction with their current pay and the financial pressure of living paycheck to paycheck.

Moving Forward

These findings underscore the urgent need for policies and programs that can provide more financial stability for American workers. One potential solution is improving access to financial education and resources that can help individuals better manage their money and build emergency savings. Additionally, there is a need for employers to offer more competitive wages and benefits that can help employees keep up with the cost of living.

This also highlights the impact of financial stress on credit scores. Living paycheck to paycheck often means individuals are more likely to miss payments or rely on credit cards to cover basic expenses, which can negatively affect their credit scores. Poor credit can limit access to affordable loans and other financial products, creating a cycle of financial instability.

As policymakers and financial institutions consider ways to support workers, addressing the root causes of financial insecurity is crucial. This includes tackling inflation, providing better wages, and ensuring that all workers have access to the resources they need to achieve financial stability. Only by addressing these systemic issues can we hope to alleviate the financial pressure on millions of American workers and create a more secure economic future for all.