With wages stagnating, the price of many necessities soars


By Patrick McHugh - N.C. Justice Center



Getting by is getting harder in North Carolina. The cost of some basic necessities are growing faster than wages in North Carolina, catching households that have to spend the bulk of their income on things like food and housing in a tightening vice. When families don’t earn enough to make ends meet, they can’t buy goods and services that provide jobs for other North Carolinians, so the entire economy slows down.

Inflation has been low over the last year or so, with some economists arguing that this should blunt concerns over wage stagnation. From the end of 2007 through July of this year, the cost of all goods and services that the average household purchases increased by 12.6%, while wages increased by almost the same amount. However, as can be seen above, the cost of essential needs like food and shelter has actually outpaced many other types of consumer goods. The price of shelter increased by 14.5% from December 2007 to mid-2015, and the cost of food went up almost 20% during that same period, growth that outpaces wages in both instances.

The practical effect of these trends is that families living in poverty are feeling the squeeze more than the average household. It should come as no surprise that low-income families are forced to spend a larger share of their income on basic necessities than their more prosperous neighbors.

For example, households in the bottom fifth of income spend 16% of their outlays on food, compared to 11% for the top income group. Households at the bottom of the income distribution spend over 40% of their budget on housing, while the top group comes in around 30%. The real world consequence of this is that poorer families have seen the cost of what they have to spend their money on go up much faster than middle of high income families.

High-level economic data can often shield the most economically vulnerable from view, masking the daily challenges that arise when wages don’t keep up with the growing costs of the basics. Before anyone declares victory in North Carolina, we need to see wage growth that allows working people, and the economy, to make progress.

Patrick McHugh is the economic analyst for the N.C. Budget & Tax Center.

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By Patrick McHugh

N.C. Justice Center

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