Wealth Disparity Widens as Lower-Income Americans Struggle

The economic divide in the United States has become increasingly evident, with wealthy individuals continuing to spend while lower-income families face mounting financial pressures. On a recent morning in Chicago, Ulysses Moreno, 39, arrived at the Pilsen Food Pantry two hours before it opened, joining a long line of people seeking assistance. Having lost his construction job shortly before, Moreno expressed the urgency of his situation: “This is a lifeline for me.” With three teenagers at home, he noted, “Our food budget doesn’t stretch as far as it used to.”

Just a few miles away, Chicago’s Magnificent Mile buzzed with activity. Luxury hotels welcomed guests, high-end jewelry stores thrived, and restaurants overflowed with patrons enjoying $20 cocktails. Evelyn Figueroa, a family physician who founded the Pilsen pantry, highlighted the stark contrast: “For people like me, who are homeowners, who are employed, the economy is great. How is the economy? It depends who you’re looking at.”

The disparity between rich and poor is not a new phenomenon, but it has become more pronounced recently. According to a report from Moody’s Analytics, the top 10% of U.S. households now account for nearly half of all consumer spending, the highest share since the late 1980s. While consumer sentiment has improved among higher earners, it has steadily declined for those in lower-income brackets. “This isn’t just an inequality story — it’s a macroeconomic story,” said Lindsay Owens, executive director of the Groundwork Collaborative. She noted, “As the wealthy continue to consume, that’s masking more and more insecurity and instability in the economy under the hood.”

This economic split has tangible implications across various sectors. Airlines report that affluent travelers are filling first and business-class seats, while cheaper seats remain unoccupied. Furthermore, credit card companies are vying for the attention of high earners, offering premium cards with lavish perks. In contrast, lower-income households are struggling to meet minimum payments on existing debts.

Christopher J. Kempczinski, CEO of McDonald’s, remarked on the trend during a recent earnings call. “Visits across the industry by low-income consumers once again declined by double digits versus the prior year period,” he said. “This bifurcated consumer base is why we remain cautious about the overall near-term health of the U.S. consumer.”

In the wake of the pandemic, inequality had appeared to diminish as government aid flowed to households and businesses. Wages in low-paying sectors surged due to heightened demand for labor. However, as the labor market cools, wage growth for lower-income workers has stagnated. Data from the Federal Reserve Bank of Atlanta indicates that hourly wages are rising most slowly for the lowest-paid workers, reversing the previous trend.

As slow wage growth coincides with ongoing inflation, many families find themselves relying more on credit cards and borrowing to manage their expenses. While widespread defaults and bankruptcies have not yet occurred, high debt levels leave households with little capacity to absorb increased costs or income loss. According to consumer research firm Numerator, lower-income households have significantly cut back on discretionary spending, limiting their financial flexibility. “People are still consuming the basics, but they’re cutting back on all this extra stuff they were able to do coming out of the pandemic,” stated Leo Feler, chief economist at Numerator.

The situation for lower-income families has been exacerbated by recent government policies. Farmers have faced challenges due to trade wars, and cuts to the federal workforce have disproportionately affected areas reliant on government jobs. In Pilsen, a predominantly Hispanic neighborhood in Chicago, local businesses report decreased customer traffic amid heightened immigration enforcement. Figueroa has noted an increase in requests for grocery delivery services as families express fear about venturing out. “There’s a lot of need,” she said. “I’m always trying to think, What’s the next emergency?”

While macroeconomic indicators suggest resilience, much of this growth is reliant on high-income households. Economists at the Federal Reserve Bank of Boston found that since 2022, consumer spending growth has been primarily driven by the highest-income consumers. Lower-income households have experienced much weaker spending growth, leaving them vulnerable to economic shifts.

The Federal Reserve faces a complex challenge in addressing this economic landscape. While strong consumer demand remains a concern for inflation, maintaining high interest rates could exacerbate weaknesses in the labor market. Although the unemployment rate was reported at 4.3% in August, recent data has shown a slowdown in hiring, raising concerns about potential job cuts.

For many individuals, finding employment has become increasingly difficult. Nearly 2 million Americans are classified as long-term unemployed, the highest number since the pandemic began. Recent graduates, Black workers, and other demographics often bear the brunt of labor market fluctuations.

At a recent career fair hosted by the National Able Network in Pilsen, job seekers filled a conference room, seeking opportunities amid uncertainty. Some participants had jobs but were on the lookout for better prospects, while many had lost positions months or years earlier. Joycelyn Saunders, who lost her job at a financial services firm in December 2023, has been searching for work ever since. She shared her experience, stating, “I am just making ends meet, and that’s it. I’m not able to save. I’m not able to pay down things on my credit.”

Despite positive reports about the economy, Saunders noted that those benefiting from it often seem disconnected from the challenges faced by ordinary people. “Good for who?” she questioned. “Listen to the people and what they are saying about what’s happening right now. Even middle-class families are suffering.”

This complex economic landscape underscores the pressing need for policies that address the widening wealth gap and support those most affected by economic instability.