A new report shows poor households cannot earn enough to live in even the least expensive metropolitan American cities. This is a signal that the country’s slow-motion economic collapse is hitting low-income workers the hardest.
Commentators continue to cheer on America’s so-called booming economic recovery. Last quarter, the U.S. economy grew at a surprisingly good 3.7% annualized rate. Stock market indices, including the S&P 500 and the Dow Jones Industrial Average, are holding just below their all-time highs.
However, little of this expansion is trickling down to the average American household. According to the Family Budget Calculator designed by the left-leaning Economic Policy Institute (EPI), low-income families cannot afford to live in any metropolitan area.
The Family Budget Calculator is designed to measure the income a family needs in order to have “a secure yet modest standard of living.” The calculator estimates living costs for 10 family types in 618 metropolitan areas. The estimated living costs include expenditures on housing, food, childcare, transportation, healthcare, other necessities, and taxes. The calculator was updated in August 2015 using data from 2014. (Source: Economic Policy Institute, last accessed September 1, 2015.)
The key takeaway from the updated Family Budget Calculator is this: even in the most affordable metropolitan area, low-income workers cannot earn enough to meet family needs.
According to the EPI, the official poverty threshold for a two-parent, two-child family is $24,008. However, being above this poverty line does not mean a family can afford living in any of the U.S. metropolitan areas. The least expensive metropolitan area for families with two parents and two children is Morristown, Tennessee, with a basic family budget of $49,114.
The Family Budget Calculator also shows that even a family with median income cannot afford to live in most metropolitan areas. The most recent measure for the median U.S. household income was $51,939 in 2013. What is the median family budget among 618 metropolitan cities? $63,741 in Des Moines, Iowa. This suggests that if a family earns median income in the U.S., it can only afford to live in relatively inexpensive cities.
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Economic data for the U.S. has been quite good lately. Last week, the U.S. Bureau of Economic Analysis reported that the U.S. real gross domestic product (GDP) grew at an annual rate of 3.7% in the second quarter of 2015—a much higher rate compared to expectations. (Source: Bureau of Economic Analysis, last accessed September 1, 2015.) Moreover, both the unemployment rate and jobless claims have been trending downwards for some time. The housing market and auto sales also showed solid upward momentum.
But all that growth we see from economic data missed this one thing: “even in the best of economic times, many parents in low-wage jobs will not earn enough through work to meet basic family needs.”