Can the average American still afford to live in America?
This article is part of a series of insights into what an Average American life really looks like.
In the previous article from this series, we found that the median male worker in the U.S. earned $57,456 in 2019, 21% more than the median female, who earned $47,299. With a labor penetration rate of 69% among men and 56% in women, the true median income sits around $52,905.
We also found that the median household income is $68,703.
Can the average American still afford to live on these incomes?
A look at the average annual expenditures of all consumer units in the United States in 2019 raises doubts. (Consumer units include families, single persons living alone or sharing a household with others but who are financially independent, or two or more persons living together who share expenses.)
The total average U.S. consumer spend amounts to $63,036. This is the amount of spend after tax! Once factoring in tax to be deducted from income, the average American cannot afford to spend this much. In fact, 54% of American households spend more money than they bring in.
Breakdown by category:
Housing 20,679
Transportation 10,742
Food 8,169
Personal Insurance and pensions 7,165
Healthcare 5,193
Entertainment 3,529
All other expenditures 3,050
Cash contributions 1,995
Apparel and services 1,883
So no, the average American cannot afford to live the Average American life, but there may be some cities where it is possible.
The average U.S. household size in 2020 is 2.3 people. How does household size and location impact our ability to afford the cost of living in different cities? Where can you afford to live today?
(All figures shown annually. Some costs are held at the national average when state statistics were unavailable.)
Single person, living in 750 sq.ft
As the numbers show, being a single person in a system that still rewards people for getting married is becoming increasingly unrealistic. In 6/10 cities cited above, it would be a struggle for most workers to get by renting a 750 square foot place for yourself.
Things do look a little better for the “traditional” family household. Though there is a noticeable difference between families where both parents work vs. those that don’t.
Two adults working, one child, living in 1000 sq.ft
One adult working, one adult not working, one child, living in 1000 sq.ft
Author’s note: Housing costs really stick out when we look at yearly expense. They are simply too great a percentage of annual income. This wasn’t the case for previous generations but is a leading factor for growing income inequality. People can’t accrue enough wealth to ever afford a down payment on a house, which is known to be a vital mechanism to build net worth. Next time, we’ll take a closer look at how the housing affordability gap has increased over the past 50 years. Click the Follow button to be notified for that article.
Sources:
https://www.bls.gov/oes/tables.htm
https://howmuch.net/maps/taxsim?taxYear=2013&maritalStatus=1&firstIncome=46440&stateCode=18
https://renthub.com/maps/cbsa_census_tract/Louisville%20Central,%20KY
https://www.bls.gov/cex/pumd_data.htm
https://www.childcareaware.org/wp-content/uploads/2015/10/2015-State-Fact-Sheets-Kentucky.pdf