Inflation is often called a tax on the poor, but this time it’s hit middle-income households the hardest.
Many low-income households, benefiting from exceptionally low unemployment rates, have found jobs and experienced wage increases that lifted income more than the cost of living, according to studies by the Congressional Budget Office and others. Many were also bolstered by federal payments during the pandemic.
At the high end, many households have seen big losses in stock and bond markets, but their income and savings were large enough that they were able to keep spending aggressively.
The middle has been in a vise. Purchasing power from paychecks fell 2.9% for middle-income households in 2022 compared with 2021, while rising 1.5% for the bottom fifth of households and 1.1% for the top, according to the CBO study. A growing share of middle-income households say they are having more trouble making ends meet, according to Census Bureau surveys.
Median household income was $70,784 in 2021, according to the Census Bureau.
Jessica DeCicco, 43, raises four children and works from home as an executive assistant at a local marketing company, earning $30 an hour. Her husband, Vinny, is a sergeant in a New Jersey police department, making $125,000 annually.
In their suburb of Long Valley, N.J., that is enough income for a home, appliances, two cars and daily staples such as groceries. But the family feels stretched.
Their water bill is up $200 quarterly from a year ago, and electricity costs about $100 more each month. Before the pandemic, weekly trips to the grocery store cost about $200; on a recent trip, the bill hit $378. Ms. DeCicco is still buying organic milk for her children, but it is now a $40 line item on the grocery bill for the four gallons they drink a week, up from $28 before.