29% of American’s households have jobs but struggle to cover basic needs, putting them in the ALICE category – Asset Limited, Income Constrained, Employed!
As time goes on, more and more Americans are finding it tough to manage financially due to rising costs and slow growth in wages. About 29% of the population – 40 million families – are classified as ALICE (Asset Limited, Income Constrained, Employed). This term, invented by the United Way’s United For ALICE program, is used to refer to households earning above the poverty line but still struggling to make ends meet.
It’s important to point out that, apart from the number mentioned above, according to the U.S. Census Bureau, 37.9 million Americans – another 11.5% of the population – are living in poverty.
“ALICE is the nation’s child-care workers, home health aides and cashiers heralded during the pandemic — those working low-wage jobs, with little or no savings and one emergency from poverty,” said Stephanie Hoopes, national director at United For ALICE.
Impact of Inflation on Low-Income Families
Economics professor from Columbia Business School, Brett House, implies that the term ALICE captures the struggle faced for decades by lower-middle-class individuals. These households can barely meet their current expenses for their needs and find it challenging to accumulate savings for investments, like homes or stocks. According to House, “it’s an acute situation for more people now than a few years ago”.
The burden of inflation falls disproportionately on low-income households. Basic necessities such as food, rent, and gas, which form a larger portion of their spending, have witnessed substantial price hikes. Greg McBride, chief financial analyst at Bankrate.com, emphasizes that ALICE households “bear the brunt of inflation” despite some wage growth in the low – to moderate – income bracket.
Covid-19 pandemic caused price increases to reach their highest levels, since the early 1980s, and the inflation has persisted ever since. In response to the issue, the Federal Reserve raised interest rates significantly, leading to a surge in borrowing costs for consumers. This, in turn, intensified financial strain on many households.
This defies expectations of rate cuts by the Federal Reserve. In addition to that, real average hourly earnings for workers have barely increased, raising just 0.6% over the past year. Leaving the economic landscape challenging for many.
Meanwhile, lower-income families have even fewer options to adjust their spending or bolster their savings. Some are resorting to credit cards to cover expenses, which can drive up credit card debt, as seen last year when it spiked to an all-time high.