Ordinary Americans Are Counting the Cost of Thriving

Economists will spend hours poring over US inflation data released on Tuesday. But their calculations mostly obscure the experience of American families trying to make ends meet.

In 1985, an American man working the typical full-time job could support a family of four on 40 weeks of income, and be able to afford a range of nutritious foods, a three-bedroom house, a comprehensive health insurance plan, a family car, even saving to put both kids through the state university. In 2022, paying for all that would require 62 weeks of his income, which is a problem, there being only 52 weeks in a year.

These figures come from the Cost-of-Thriving Index (Coti), which compares the rate at which wages are rising to the rate of cost increases for middle-class staples. They show starkly the effect on household budgets of a decades-long stretch in which housing prices, health insurance premiums, college tuition, and more skyrocketed much faster than wages.

Traditional measures of inflation miss this fact. When inflation-adjusted figures report that a 2022 earner could afford roughly what a 1985 earner could, that assumes the 2022 earner still wants to drive a 1985 car, live in a 1985 house, watch a 1985 television, and receive 1985 medical care — and that we would call that “middle class”. 

Think about healthcare, where economists (rightly) celebrate extraordinary but costly breakthroughs in medical technology while families (also rightly) notice that insurance premiums keep eating a larger share of their salary.

Measuring inflation is important. But measuring the cost of living in the middle class is important too.

The Coti calculates the cost of a clearly defined set of items that a middle-class family should be able to afford: a typical basket of nutritious food as established by the US Department of Agriculture; monthly rent for a just-below-average three-bedroom house in a moderately priced housing market; a family health insurance plan of the type provided by an employer; driving a car 15,000 miles; and saving enough to fully fund enrolment in a public college for two children. In 2022, all this would cost roughly $76,000.

Divide this cost by the median weekly wage for a man employed full-time, which in 2022 stood at $1,219, and you get the 62 weeks needed to cover the costs, up from 40 weeks in 1985.

Younger men in prime child-rearing years have lower weekly wages and thus a higher Coti — it reached 73 last year. Women’s median wages tend to be lower than men’s, producing Cotis that are higher still.

This approach also puts regional inequities into stark relief. California has the second highest Coti, at 73, but first prize goes to West Virginia, at 79. What these otherwise very different states have in common is an unsustainable economic trajectory — whether that is high wages unable to keep pace with higher costs, or wages so low that even low costs become unaffordable. The better-off states are the ones that have stayed closer to the middle of the road, generally in the upper Midwest: Wisconsin, Oklahoma, Minnesota and the Dakotas, for example.

Focusing on the cost of thriving helps us to answer some fundamental questions. Why do so many families have two parents working full-time, although they say they would prefer to have a parent at home with young children? Why isn’t everyone “moving to opportunity” in big coastal cities? It confirms what everyone knows though the data disguises — that raising a family on one income used to be much easier, and that for all the celebration of growth and technological progress, something important has been lost.