Many Americans Have Lost Hope for Real Income Growth

The past few years of elevated inflation, high costs of living and stagnant real wages have left a lasting impression on Americans’ minds. So much so that their optimism regarding future (real) income growth is near all-time lows.

According to the University of Michigan’s Surveys of Consumers, 34 percent of Americans see a zero percent chance that their family’s income will increase by more than the rate of inflation in the next five years or so, up from rates in the low teens typically seen before the pandemic and from 16 percent five years ago. Another 25 percent see a 1 to 24-percent chance of their real income growing over the next five years, meaning that almost 6 in 10 Americans see a very low chance of their income outpacing inflation in the near future.

On average, the respondents saw a 25-percent chance of real wage growth, down from more than 42 percent five years earlier and a long-term average of 37 percent since 2000. In the short term, just 10 percent of respondents expect their family income to grow faster than prices in the next year or two, which is the lowest share since 2012. While real wages have actually been growing for the better part of the past three years, the wage level still hasn’t caught up to where it was when the inflation surge started in 2021, which is why many Americans feel worse off now then they did five years ago.