AUSTIN, TX – It turns out that there’s a perfectly good reason why many young Americans are struggling to make ends meet despite the Biden administration’s insistence that the U.S. economy is a picture of perfect health.
A recent study – based on government statistics – has found that young people today need to earn almost 20 percent more to save at the same rate as their parents did in 1980.
Conducted by researchers at Sparefoot.com in Texas, that study compared the median household income and expenditures in the 1980s to those nowadays to gauge how much harder it is for the typical couple to save money now compared to their parents’ experience.
That research found that median household expenses went from equating to 72.2 percent of typical income in the 1980s to a massive 94.7 percent bite out of typical income in the 2020s.
Analyzing data from the Bureau of Labor Statistics, the U.S. Census Bureau, the Department of Agriculture and the Department of Energy, the comparison experts at Sparefoot found that rent has experienced the most significant rise over the past 40 years.
In 1980, only 11 percent of typical household income was allocated to rent. By 2022, however, that proportion of income allocated to rent had nearly doubled to 20.4 percent.
“This study serves as a reminder of the evolving economic challenges that younger generations face today,” according to Chuck Gordon, the CEO of Sparefoot.
“As rent and living costs continue to climb, the dream of homeownership is becoming increasing out of reach for many Americans.”
Forty years ago, Gordon explains, the average family spent just 72.2 percent of their income on everyday expenses, including housing, health care and food costs. Today, the average family spends 94.7 percent of its income on those same expenses, which significant limits the family’s ability to save toward a down payment on a home.
In 1980, for example, the federal minimum wage stood at $3.10 while the median household income was $26,618.
By 2022, the federal minimum wage had more than doubled to $7.25, while the median household income more than tripled to $74,580.
In addition to the huge increase in rent costs since 1980, however, other expenses rose just as sharply.
One such increase was for groceries, rising from 2.5 percent of median income in 1980 to 7.7 percent in 2022. Consumers today complain that they feel the bite of inflation most often during grocery shopping.
The cost of food consumed outside the home, such as restaurant meals, also more than doubled from 1.9 percent of median income in 1980 to 4.9 percent in 2022.
Healthcare costs are another expense that more than doubled in the past 40 years, jumping from 3.5 percent of median income in 1980 to 7.8 percent in 2022.
“This gap between rising expenses and stagnant wage growth underscores the need for older generations to recognize and empathize with these financial pressures (being felt by their children),” Gordon emphasizes.
“Initiatives such as help-to-buy schemes could provide critical assistance,” he adds, “offering a lifeline to those struggling to build a secure future.”
Sparefoot.com is a storage unit comparison site based in Austin, TX.
For additional information about this study, visit https://www.sparefoot.com.