An implication of the ALICE reports is that it is harder to make it financially today than it used to be. As the Michigan United Way puts it in the latest report, the findings show an “increased cost of living” and “low wages, reduced work hours, and depleted savings.”[78] This is counter to the bulk of the evidence suggesting that, on average, households are wealthier than they used to be, and that lower income households benefit more from government transfer payments than they had previously.
The latest ALICE report for Michigan says a family household needs to earn more than $64,116 per year to meet the survival threshold. It says 1.5 million households, 38% of those in the state, do not.[79] If essential goods are becoming more difficult to afford, spending on these items would consume a larger portion of households’ budgets over time. But just the opposite has happened.
While spending on housing increased by 4% for middle-income households and 5.5% for low-income households since the early 1980s, this cost as a percentage of the average household budget has been relatively stable.[80] It was 30.4% in 1984 and 32.8% in 2019.[81] Some of that higher cost has been driven by the fact that the average home size has substantially increased: the median home built today is nearly 1,000 square feet larger (2,491 square feet) than homes built in the early 1970s (1,525 square feet), despite smaller family sizes.[82]
Even while the number of cars per household has gone from 1.0 to 1.6 since the 1980s, and though vehicles are safer, more reliable and more fuel efficient, transportation spending has declined by 1% for middle-income families and 3% for low-income families since 1984.[83] In other words, households today spend less on transportation than they used to but have more and better vehicles, on average.
Spending on food has been on the decline for decades, shrinking from 17.5% in 1984 to 16.0% in 1998 to 12.9% in 2019.[84] And an inflation adjustment to the cost of food back in 1913 shows most common items cost far less today. Bread is a little more expensive, on average, but staples like flour, meat, milk, eggs, sugar and more cost significantly less than they used to.[85]
A Brookings Institution analysis says health care costs have increased by 2-3% of the budget for low and middle-income households from 1984 to 2014.[86] Another analysis from Dartmouth College says the percentage of household income spent on health care has remained constant since 1972, because employers and the government are picking up more of the costs.[87]
Child care costs have increased by nearly 49% in real dollars since the early 1990s, according to the Bureau of Labor Statistics, but as a share of family income, there has not been much of an increase. For low-income families, the monthly cost of childcare increased only 3.3% from 1990 to 2011 and, as a share of family income, it has increased from 16.5% to 17.4%.[88] Even if households are forced to spend more on health care and child care than they used to, these increases would not have a large overall effect on the typical household budget, especially considering reduced costs in transportation and food.
The long-term trends show that, today, the average household earns more money, spends a smaller share on necessities and gets a better bang for their buck from that spending. Using measurements based on average spending results in a sizable portion of the population always appearing to not earn enough income to make ends meet. But average consumer spending is a poor indicator of relative poverty levels as it can mask reductions in the minimum costs of essential goods — and improvements in the quality of those goods — that occur over time.