A new study has found that most Americans live paycheck-to-paycheck as they fight to make ends meet with the economic effects of the pandemic lingering and inflation continuing to rise.
A study by LendingClub found that 63% of U.S. workers living in metro areas struggle to break out of the cycle that leaves them barely making ends meet. For rural workers, 39% are dependent on their next check covering their everyday expenses.
One leading factor that makes financial stability hard for many Americans is an increase in cost of living expenses, with income and wages remaining somewhat stagnant; this is what's called stagflation.
The Federal Reserve is preparing for a two-day policy meeting to discuss these economic conditions that are throwing central bankers and Americans for a loop.
Financial analyst Jill Schlesinger joined News Talk 830 WCCO's Steve Simpson about this meeting.
The Delta variant has played a part in cooling economic growth with inflation rates staying high, and now this meeting will be crucial in helping the U.S. economy get back on track.
"It's important because there is a strange thing going on in the U.S. economy currently, and that is we are seeing growth slow down because of the Delta variant, and at the same time prices remain high," she said. "That is a condition known as stagflation, stagnating economic growth with high prices inflation."
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While Schlesinger doesn't think we will see 1970s level stagflation, she does think the Federal Reserve is in a tough spot.
"They've got two jobs, create economic growth so people can get back to work and also keep prices in check," Schlesinger said.
Schlesinger said that the Federal Reserve has chosen to favor getting people back to work over keeping prices in check, but soon they may have to switch it up.
"I think at some point they're gonna have to pull the trigger, and they are gonna have to start changing their policies," she added.
But stagflation is only part of the issue, as the problem appears to have been brewing for a long time.
Over the last thirty years, the federal minimum wage has seen little change. It went from $4.25 in 1991 to $7.25 in 2009, where it has stayed for the last 12 years.
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If it were only dependent on inflation, the federal minimum wage would need to be $2 more, or $9.37, to carry the same weight it did in 2009, USA Today reported.
While states have their own minimum wage laws, less than half, only 23, currently have minimum wages higher than $9.37, leaving many struggling to make ends meet, USA Today found.
During the same 30 year span, inflation has also affected the average cost of living. Housing costs have reached record highs, with median rent prices pushing $1,500 in metro areas and median housing prices surpassing $300,000 everywhere but in small cities.
Inflation has also affected the cost of a college degree, as the average price for one year of tuition at state universities went from $3,738 in 2002 to $11,631 in 2021. For private universities in the same time frame, the cost went from $17,938 to $43,775.
With tuition prices all but quadrupling, a report found that the average income for recent graduates in 2018 was around $50,000 compared to $40,000 in 2002.
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With the economic struggles that came from the pandemic, many have been fighting to return to a sense of normal. But as inflation continues to be the highest it's been since the early 2000s and the national unemployment rate at 5.2%, the struggle may not be over soon.
As for the Federal Reserve's meeting, Schlesinger wants to see a game plan set forth for how they plan to help the economy.
"I think what we want to see is what their game plan is. It doesn't have to be they execute it, but they need to communicate what they are gonna do," Schlesinger said.
