The percentage of U.S. households living paycheck to paycheck grew slightly as lower-income Americans continue to struggle financially while their wages fail to keep up with inflation, according to a recent analysis from the Bank of America Institute.
According to the analysis, 29% of lower-income households are living paycheck to paycheck. That’s up slightly from 2024 and from 27.1% in 2023, the data shows. Bank of America Institute defines paycheck-to-paycheck as spending more than 95% of household income on necessities such as housing, gasoline, groceries, utility bills, and internet service.
This year, the institute said that almost a quarter of all U.S. households lived paycheck to paycheck. It said several factors explain why many people are lagging behind.
First, the institute said that the nation’s inflation rate in 2025 has creeped up to an annual rate of 3% after dipping to 2.3% in April. It said the rise in consumer prices this year is well below their pandemic-era peak of 9.1% in 2022, but are above the Federal Reserve’s target rate of 2%.
“Inflation is picking back up again, and cost increases are picking back up again,” said Joe Wadford, an economist at the Bank of America Institute. “That’s definitely going to put some renewed pressure on those households.”
Second, the institute said the cost of groceries and other essentials continues to rise as lower-wage workers’ paychecks and purchasing power stagnate. In October, the institute said, wages for lower-income households were up only 1% from a year ago.
“The gap between their wages and expenses has just continued to widen since the beginning of the year,” Wadford said. “When the cost of living is increasing 3% but your wages are only increasing 1%, you’re just going to really struggle to keep up.”
Fewer Job Openings, People Leaving Jobs Impact Low-Income Workers
The institute said that lower-wage workers experienced strong wage growth during the pandemic and subsequent economic recovery, but that increase has slowed sharply since late 2022, said Elise Gould, senior economist at the Economic Policy Institute. The institute said that one factor weighing on wage growth is a decline in the number job openings and the rate at which workers are leaving their jobs.
“When people aren’t looking for other offers or quitting, that is going to cause wage growth to slow,” she said.
In the preceding 12 months through October, higher-income millennial households have seen their average wages grow five percentage points faster than those of lower-income millennials, according to the institute.
Bank of America Institute noted that while lower-income households are struggling, middle- and higher-income households are on firmer financial ground, buoyed by stronger wage growth. This demographic has seen little to no increase in the share of households living paycheck to paycheck, the Bank of America Institute said.
“These higher-income cohorts are more able to absorb the recent reacceleration in inflation due to their outsized wage growth,” Wadford said.
The institute said that is fueling what economists refer to as the “K-shaped economy,” what experts describe as the divergence in spending and financial health between wealthier Americans and people with more modest incomes.
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