For low-income families, budgets are even tighter than they used to be. The basic necessities of life are eating up a bigger share of poor families’ spending compared to 30 years ago, leaving little money left over for anything else.
In one key way, America’s poor have gotten poorer over the past 30 years
Libby Nelson was Vox’s editorial director, politics and policy, leading coverage of how government action and inaction shape American life. Libby has more than a decade of policy journalism experience, including at Inside Higher Ed and Politico. She joined Vox in 2014.
And the biggest culprit is the cost of housing. Low-income Americans are now spending 41 percent of their budget on housing, up from 35 percent in 1984.
The Hamilton Project at the Brookings Institution analyzed 30 years of census data on American households’ spending. They found that after adjusting for inflation, the majority of Americans spent more in 2014 than in 1984. But low-income households, they found, are getting squeezed.
First, after you adjust for inflation, families in the bottom 20 percent of the income distribution spent less than they did 30 years ago. Their spending has fallen by 5 percent since 1984, while spending rose slightly for middle-income and increased nearly 10 percent for wealthier families.
Second, basic needs — housing, clothing, health care, food, and transportation — now take up 80 percent of low-income households’ spending, up 2 percentage points since 1984. Meanwhile, the share of income devoted to basic needs was virtually unchanged for middle-income people and fell for high-income households.
For poor and middle-class Americans, the rent is too damn high
The startling thing about this finding is that the price of some necessities has actually grown more slowly than the overall economy. The cost of transportation and clothing grew more slowly than prices rose overall, and households are spending less accordingly. The price of food overall has held steady, but many individual staples, such as milk, have seen their prices fall in inflation-adjusted terms. Even inflation-adjusted housing prices have held steady.
The exception is health care, which is nearly twice as expensive, even taking inflation into account. And middle- and low-income families both devoted more of their budget to health care in 2014 than in 1984.
But what’s really squeezing their budgets is housing. The poorest Americans spend 41 percent of their budgets on rent, property taxes, utilities, and mortgage insurance, compared with 30 percent for the wealthiest:
In 1984, low-income Americans spent 35 percent of their budget on housing. Now they spend 41 percent. And while the share of spending going to basic needs is relatively unchanged for middle-income families, they’re spending more of their budget on housing, too:
The report’s authors point out that housing costs vary significantly by region, and that the fact that they appear flat overall hides the fact that housing is now quite a bit more expensive in the Northeast and West.
But the bottom line is that cheaper clothing, food, and transportation isn’t really making life better for middle-class and low-income families. It just means they have more money left over to spend on even more basic necessities of life: good health and a roof over their head.
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