People are angry about economic trends and are searching, as voting trends reveal, for ways to communicate their strong desire for change. A recent Pew Charitable Trusts issue brief on Household Expenditure and Income provides powerful insight into those trends.
The issue brief focuses on households in which survey respondents or their spouses are between the ages of 20 and 60. The households are then divided into thirds based on income. The key takeaway is the growing economic insecurity of US households.
Figure 1 shows that it took until 2014 for inflation-adjusted median and mean household expenditures to return to their pre-recession levels.
However, as Figure 2 shows, the median rise in household expenditure was not matched by a corresponding increase in median pre-tax household income.
As the authors of the issue brief explain:
By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.
Figure 4 highlights the recent upswing in costs of housing, food and transportation.
The housing squeeze has become especially severe for low income renters. As Figure 6 shows, in 2014, low income renter households spent almost half of their pre-tax income on housing.
More generally, as Figure 10 reveals, households in all three income groups are experiencing budget tightening; they have significantly less money left over after meeting their regular annual expenditures than they did in 2004.
The amount of slack that families had in their budgets declined for all income groups between 2004 and 2014. . . . In 2004, the typical household in the lower third had a little less than $1,500 left over after accounting for annual outlays. Just 10 years later, this amount had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures. The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014. Of note, because income is measured before taxes, some families will have had even less slack in their budgets than this figure implies.
Sadly, there is no reason to believe that majority economic prospects will take a turn for the better.