More Americans are living paycheck to paycheck, largely because low-income earners spend most of their money covering essential expenses like housing, gasoline and groceries, according to new data from Bank of America.
The study, released Tuesday, found that nearly 24% of all households are classified as living paycheck to paycheck this year, meaning their immediate income is going toward basic necessities. This share is slightly higher than last year, but the rate has slowed year over year.
The reason for the slowdown: Financial difficulties are increasingly concentrated among low-income people. “The number of low-income households (especially Millennials and Generation X) living paycheck to paycheck continues to rise while there is almost no increase in the number of high- and middle-income households,” according to the BofA study.
Data shows that 29% of low-income households are living paycheck to paycheck, up from 28.6% in 2024 and 27.1% in 2023. However, there has been little to no increase in the share of middle- and high-income households using their immediate income to cover just basic expenses. “Why are we only seeing an increase in the number of low-income households? In our view, this is likely due to slower wage growth for this cohort,” the study authors write.
BofA pointed out that wages for low-income earners have lagged behind those of their higher-income counterparts since the start of 2025.
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By age, BofA data shows that more middle-aged households, such as millennials and Generation X, have been living paycheck to paycheck since last year.
Meanwhile, higher-income millennial households saw their average wages increase five percentage points faster than that of lower-income households in the same generation.
The data reflects the “K-shaped economy” highlighted by strategists, in which higher-income asset owners generate the bulk of consumer spending and fare better than lower-income households. “It’s very divided, and I think that reflects what we’re seeing in the economy and consumers in general,” Art Hogan, chief market strategist at B. Riley Wealth, told Yahoo Finance on Monday.
Consumer staples (XLP) companies and fast-food restaurants ranging from Chipotle (CMG) to McDonald’s (MCD) have warned of the bifurcated consumer trend and the pressures facing low-income earners.
“Think about low-income consumers and…the pressures they face…rents are at pretty high levels…food prices, whether in restaurants or grocery stores…child care is high,” McDonald’s CEO Chris Kempczinski said last week.
