By Mackenzie Hawkins
Amber Medley was making about $15 an hour as an office assistant before the pandemic — not a lot by any stretch, but enough to cover rent and save a little each month.
Like many Americans, Medley got a new job and a raise last year, leveraging the tight labor market to boost her pay. But the additional $5.20 an hour at the administrative role in Rochester, New York, is almost entirely wiped out by inflation. Add in a stretch when she was unable to work because she didn’t have childcare, and Medley’s financial situation has worsened significantly.
“In 2020, I was making $15 an hour and I felt more secure than I do now,” Medley, 36, said.
Millions of Americans switched jobs during the pandemic, taking advantage of record-low unemployment and a persistent labor shortage to earn big raises. At the same time, surging costs for housing, groceries, gas and food have stretched household budgets, eating into savings and increased earnings, particularly for hourly workers. And while the job market remains strong, the leverage that US workers once felt over their employers has fizzled as layoffs mount amid fears of a recession.
For Medley, even wage gains of more than 30% over the last three years have not kept up with rising prices. She was evicted from her apartment in Rochester after a rent increase she couldn’t afford. Her savings are depleted and she has $10,000 in new debt since the start of the pandemic, including $1,600 in outstanding gas and electric bills. Today, she’s living with her two young children in her grandmother’s home. A place of their own — her son’s Christmas wish — feels out of reach.
“A large share of the population does not have significant savings built up,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “That’s a precarious state to live in because it means any unexpected expense or emergency can knock you off course.”
The financial cushions that many families built during the pandemic thanks to stimulus programs and reduced spending are shrinking, particularly for those in lower income brackets. The average household in the bottom half of earners had an extra $5,500 set aside in mid-2022, according to Federal Reserve estimates. But since then, credit card debt has risen at the fastest pace in more than two decades, savings rates have plummeted to a 17-year low and pandemic assistance programs have largely expired.
That’s bad news for people like 28-year-old Sydny Tolin Keig, who used stimulus checks to boost her bank balances to $1,000 in savings and $3,000 in a checking account during the pandemic, even after lockdowns cut her work hours by half. She went into the pandemic making just shy of $19 an hour at a government job, a wage that allowed her to save, go on trips and “do the things I wanted to do,” she said.
Now, she earns almost $25 an hour, a sizable raise even after the additional taxes she pays at the new gig. But she still feels squeezed financially.
Tolin Keig lives in Mesa, Arizona, where inflation was above 12% in October, the highest in the country at the time. Her energy bill has doubled since last year and she’s paying more than $4 a gallon for gas. She recently refinanced her townhouse, agreeing to a higher mortgage rate so she could take out $14,000 to pay for unexpected air-conditioning repairs and reduce the “exorbitant amount” of credit card debt she’s accumulated over the past few years.
“It just feels like I go to work, go home, play with my dogs, go to sleep, wake up and then work again,” Tolin Keig said.
While some Americans were able to pay down debt during the pandemic, households’ overall debt burden has ballooned to $16.5 trillion as of the third quarter of 2022. Rising interest rates on mortgages and other consumer debt are stressing people’s savings. More than 35% of US households relied on credit cards and loans to meet everyday expenses in December, the highest figure since the Census Bureau began collecting the data in April 2021.
Estefania, a 25-year-old in Chicago who left school during the pandemic and now works at a customer service call center, owes $5,000 on her credit cards, up from $3,000 in early 2020. She has begun to repay that debt using Tally, a credit-line app that’s charging her a 24% interest rate. She’s considering moving back in with her mom and brother to save money. (Estefania requested her last name not be used in order to share personal financial information.)
Her raise to $23 an hour from $20 at the beginning of 2022 feels like chump change when her savings have been cut in half and her grocery bill has doubled.
To make matters worse, the higher pay means she no longer qualifies for food stamps, which helped feed her family during the pandemic. And while she’s benefitted from the pandemic pause in student loan payments, she’s been banking on President Joe Biden’s forgiveness plan, which is tied up in the courts and faces an uncertain future.
Estafania thought she was living paycheck to paycheck before. Now, she said, she actually is.
More stories like this are available on bloomberg.com.