Why Increasing Numbers of Middle-Income Americans Are Finding It Harder to Save

Despite lower inflation rates and wage increases, middle-class Americans continue to face economic difficulties. Many report that saving money has become increasingly challenging.

This situation is often attributed to stagnant wages alongside rising prices for essentials like gas, groceries, and utilities, a trend that started in 2021 and remains ongoing.

Mary Lopez, a marketing manager with a middle-incomes at Trusted Wedding Gown Preservation in New Jersey, noted that wage stagnation combined with a higher overall cost of living has made it difficult to save and sustain a middle-class existence.

“In terms of significant changes, my household, like many others, has felt the impact in sectors such as healthcare and housing,” Lopez shared with The Epoch Times via email.

“For example, health insurance costs have skyrocketed, and we’ve continually faced rent increases. Many of my peers report similar struggles, finding it hard to save with these rising expenses.”

Wage Stagnation Versus Inflation

David Kindness, CPA and finance writer at Best Money, stated that wage increases have not matched the rise in costs.

“Even with certain areas of inflation easing, essential goods and services continue to be prohibitively expensive, taking larger portions of household budgets,” he expressed in an email to The Epoch Times.

“The increasing cost of grocery shopping has transformed routine trips into financial strains. Many families, mine included, have had to adjust their budgets to deal with these escalations, often cutting back in other areas just to stay afloat,” he added.

Ali Zane, a financial planner and the founder of Imax Credit Repair, pointed out that a primary cause of “paycheck-to-paycheck” living is the disconnect between wage growth and living expenses.

“While inflation is often blamed, the real issue is stagnant wages over the past two decades. Though salaries may rise slightly, housing prices have surged by 30 to 40 percent in many areas since 2020, far outpacing wage growth. With healthcare premiums and childcare costs *also* on the rise, it’s no surprise that families feel financially constrained,” Zane noted in a text to The Epoch Times.

This issue is not novel. Real wage growth has been decelerating since the 1970s, relative to the overall economic performance of the United States, according to research from the Kellogg School of Management at Northwestern University.

Generally, real wage stagnation has been linked to factors like globalization and automation; however, Kellogg finance professor Efraim Benmelech offers a different perspective.

“None of these explanations extend far back enough,” he stated. “Wage growth has been on the decline since the early 1970s,” he added in a 2019 economic analysis.

Along with colleagues from the National Bureau of Economic Research, Benmelech identifies “labor market concentration” as a major hidden factor. This occurs when there are too few employers within a given sector, leading to informal salary standardization.

“In recent years, conversations have emerged about the fate of middle-class Americans,” Benmelech said. “While we don’t claim to provide the sole explanation, we do offer a perspective that reveals the long-term issue of stagnant wages.”

“Many of my friends and clients have expressed that saving has become significantly more difficult, even those who once maintained solid savings habits,” Kindness remarked. “Unforeseen expenses, such as medical bills or car repairs, can quickly diminish any emergency savings. With regular expenses already stretching their budgets, saving for future needs often feels unattainable.”

Kindness observed that the savings goals for many middle-class individuals have shifted from long-term aspirations like homeownership or early retirement to merely having an emergency fund.

Within the middle-income bracket of $51,000 to $75,000, there was the largest increase from 2019 to 2024, following households earning less than $50,000, where at least a quarter live paycheck to paycheck.

Moving up through the income brackets yielded similar results, with about a quarter of all households in this predicament. Nearly half of respondents perceive themselves as living paycheck to paycheck.

The study observed that these households face significantly higher unavoidable expenses, predominantly related to family and housing costs.

Zane highlighted that grocery expenses have become a “silent tax” burdening the middle class while also flagging the escalating utility costs as another critical factor.

“Utility expenses—often overlooked in mainstream discussions—have developed into a major budget strain for families, particularly those in areas that experience extreme weather conditions,” he explained.

This is reflected in the experiences of Maria and Andrew from the Twin Cities region in Minnesota, who requested anonymity. They shared that utility bills rank among their most significant expenses regardless of the season.

“We delay turning on the heat until we consistently experience days below 40 degrees [Fahrenheit], and similarly, we only run the air conditioning when temperatures reach the 90s,” Maria shared.

Maria remarked that her children often say the house is “always cold” in the winter because, despite turning on the heat, the thermostat is set to a brisk 66 degrees Fahrenheit.

“Even with that, our bill exceeds $500 during winter months. Although it’s better in the summer since we limit our air conditioning usage, keeping warm in winter is essential. We endure months of crippling subzero temperatures. Heating is a necessity,” Maria shared.

Maria and Andrew feel elated when they receive an electric bill that is below $200. Over the last three years, Maria has observed a consistent rise in utility costs, a common complaint among residents in their area.

Andrew stated, “We often hear officials talk about needed infrastructure upgrades, yet we are left to cope with grotesque bills afterward.”

When Andrew and Maria were asked which expense reduction would serve them best, they responded quickly with their weekly grocery bill.

“Since the pandemic, we’ve maintained the same items, quantities, and brands, yet our grocery expenditures have risen by 50 percent,” Maria explained.

Andrew added, “Dining out is a thing of the past; it’s a luxury now reserved for special occasions.”

Many middle-class income earners are also cutting back on what were once considered luxuries.

Kindness noted, “My household has limited dining out and paused several streaming subscriptions. Though these may seem minor changes, they reflect a larger pattern where individuals prioritize necessities over luxuries.”

Lopez and her family have also recalibrated their financial approach by eliminating unnecessary expenditures.

“Over the past year, we’ve made a deliberate effort to cut back on non-essential activities like dining out, subscription services, and vacations to better manage our finances. It’s unsettling to acknowledge, but what used to be ‘luxuries’ are increasingly becoming rare treats,” she remarked.

“This shift isn’t exclusive to my family; it’s a trend many middle-income earners are reluctantly adapting to, driven by escalating costs and financial unpredictability.”

Zane remarked that middle-class families are not merely canceling subscriptions or skipping takeout. They are making deeper sacrifices to save money or, in some situations, merely to get by.

“Parents are postponing their children’s extracurricular activities, forgoing preventative healthcare, and limiting professional development opportunities to sidestep additional costs. These decisions aren’t sustainable and reflect a concerning downward trend in financial stability,” he commented.

By age group, this applies to 32 percent of Generation Z, 31 percent of Millennials, 27 percent of Generation X, and 20 percent of Baby Boomers.