WASHINGTON–The gap between what Americans earn and how much they need to bring in to achieve a basic standard of living is growing, according to a new report, which suggests the opportunity and need for credit unions remains as strong as ever.
The report, conducted by the Ludwig Institute for Shared Economic Prosperity (LISEP), aims to see beyond whether people can afford daily necessities like food and shelter and to consider whether they have the means to pay for things like the technology tools necessary for work, higher education, and health and child care costs, according to the organization.
In tracking costs associated with what the group calls a “basket of American dream essentials,” LISEP said its Minimal Quality of Life index provides a “truer picture of how Americans are faring” than standard economic data, such as the gross domestic product and jobless rate.
‘Crucial Elements’
LISEP said the index captures the annual change in the typical costs facing low- and moderate-income households that are seeking to maintain a basic quality of life.
“We analyze these components not just in terms of financial figures but as crucial elements that shape a family’s capability to achieve a desirable standard of living,” the organization stated in a paper describing how it arrives at its findings.
And what do those findings show? For the bottom 60% of U.S. households, a “minimal quality of life” is out of reach, according to the group, a research organization that says it is focused on improving lower earners’ economic well-being.
Middle Class is Declining
“The middle class has been declining — we just haven’t recognized it fully,” LISEP Chairman Gene Ludwig told CBS MoneyWatch. “It’s really dangerous, because it’s the kind of thing that leads to social unrest, and it’s not fair. The American dream is not that it’s given to you — it’s that if you work hard, you have a chance to get ahead and achieve the things in life that you want to achieve. It’s not living in a tent, not having to steal.”
According to LISEP, the lowest-earning Americans around the U.S. are coming up short, as those households, which in 2023 earned an average of $38,000 per year, would need to make $67,000 to afford the items the group tracks as part of its index, which also includes professional clothing and basic leisure activities.
No Reflection of ‘Lived Reality’
“Traditional headline economic indicators like GDP and unemployment tell us the economy is thriving, but they don’t reflect the lived reality of most Americans,” Ludwig said in a statement to CBS News.. “Americans are working harder than ever, fueling our economic growth, but the benefits of that hard work are not being distributed in a way that supports upward mobility for too many middle- and low-income Americans.”
Costs Double
The LISEP analysis found that from 2001 to 2023, the cost of affording what amounts to a basic level of economic security doubled, according to LISEP’s analysis. Housing and health care costs surged, while the amount of savings required to attend an in-state, public university soared 122%.
In the meantime, according to LISEP, median earnings for the bottom 60% of income earners fell 4% over that span when adjusting for the cost of goods tracked by the group’s index. Its analysis further found that income growth for these households has also lagged, rising 0.37% per year during the same period — less than half as much as for the top 40% of earners, the group found.
The Growing Gap
The gap between how much low-income families earn and how much they need to afford a minimum cost of living is expected to keep widening, Ludwig told CBS MoneyWatch.
“Unfortunately, it is growing because the items that go into the basket of goods and services that make the minimal quality of life are inflating at a higher rate than wages are inflating,” he said.