Huffpost Money

Bottom Fifth Of Americans Spent Double Their Incomes In 2011

Posted: Updated:

The United States' lowest earners spent more than double their incomes last year, according to data released Tuesday by the Labor Department.

The bottom fifth of the U.S. income distribution -- 24.4 million households -- on average earned $10,074 in after-tax annual income and spent $22,001 last year, according to the Labor Department.

This percentage of households includes many retirees, who are presumably living off savings.

Many of these households may be spending more than they earn through some combination of loans from family and friends, credit cards, savings, and payday loans. The government helps a bit with an income tax credit: The average bottom-fifth household's after-tax income is $269 higher than its before-tax income. The income accounted for includes welfare and Social Security benefits.

Many are also taking on debt. In 2010, roughly one-quarter of the poorest fifth of households held a high debt burden, or had debt service payments exceeding 40 percent of their income, according to the Economic Policy Institute.

These households mainly are spending on necessities such as food, shelter, utilities, clothing and transportation. The average bottom-fifth household spent 87 percent of its after-tax income on housing alone last year.

It's not just the poorest of the low-income households that have trouble living off their incomes; on average, households making less than $40,000 spent more than they earned last year. Middle-class workers also are struggling to make ends meet, and according to a recent survey by the American Payroll Association, more than two-thirds of Americans now are living paycheck to paycheck.

The incomes of many Americans have failed to grow even as prices rise. The bottom 90 percent of American households gained just 9 percent of total income growth between 1979 and 2007, according to the Economic Policy Institute. The poorest tenth of American wage earners are making less now than their counterparts did in 1979.

(Hat tip: CNNMoney's Annalyn Censky.)

Update: This article has been revised to include more up-to-date information regarding household debt.

Also on HuffPost:

Close
10 Ways The U.S. Is Getting Worse For Most Americans
of
Share
Tweet
Advertisement
Share this
close
Current Slide

Suggest a correction

Around the Web

Why Henry Blodget is dead wrong - MarketWatch

Freakonomics » Tax Deductions or Tax Expenditures?

Contrary to "Entitlement Society" Rhetoric, Over Nine-Tenths of ...

How Americans Make And Spend Their Money - Forbes.com