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The Middle Class: A Look at Where Standards of Living are Highest and Lowest

Middle- and working-class families are enjoying the best standard of living in some of the most expensive U.S. cities, according to a new economic analysis. 

That may seem far-fetched given that people earning less than $100,000 in San Francisco are considered low income, but the new analysis from the Ludwig Institute for Shared Economic Prosperity (LISEP) found that the high cost of living in these regions is offset by higher-than-typical wages.

In fact, the best performing region for middle- and working-class families is the Bay Area, despite the sky-high cost of living in San Jose and San Francisco, according to the analysis of 50 big U.S. cities.

Even so, about 6 in 10 Americans are failing to meet their basic needs, with their incomes falling short by almost $14,000 on average in 2022, LISEP noted. That underscores the struggles that many households are facing after two years of rising inflation, which has pushed up costs for everything from food to rent. 

“For middle- and lower-income Americans, wherever it is in the United States, you aren’t doing great,” Gene Ludwig, the chairman of LISEP, told CBS MoneyWatch. 

Examining the intersection of wages and the cost of living at a regional level is important because “we all live locally,” Ludwig noted.

Even though the cost of living in the Bay Area is among the highest in the U.S., the region offers a more diverse mix of jobs, including a bigger range of upper-middle-income jobs, than some other cities. But cities where median household incomes are failing to keep up have sparser opportunities, by comparison. 

In cities such as Las Vegas and Fresno, “It means there are more low-wage and middle-income jobs than there are upper-paying middle-income jobs,” Ludwig noted.

The analysis was based on city-specific data including the cost of living for households, examining essential items such as housing and food, as well as earnings for full- and part-time workers, as well as for jobless people who are seeking employment. 

The unequal impact of inflation 

Ludwig, the former comptroller of the currency and the founder of Promontory Financial Group, created LISEP in 2019 to track economic measures of well-being for middle- and working-class Americans, such as wages and unemployment. 

While the U.S. government tracks such data, Ludwig argues that the measures often don’t accurately reflect the economic situation for millions of U.S. households — including the impact of inflation, which is a sore point for many Americans after two years of bruising price hikes.

Inflation has hit low- and middle-class Americans particularly hard, something the Consumer Price Index — the national measure of inflation — isn’t capturing, Ludwig noted. That’s because the CPI, a basket of goods and services, tracks some items that may not have much bearing on the lives of middle-class families, and thus doesn’t accurately reflect their experiences, he added. 

Housing as measured by the CPI has increased 54%, but Ludwig’s group’s analysis found that the typical rent for middle- and lower-income households has soared by almost three times that level, at 149%. 

“In the last 20 years, inflation for middle- and lower-income Americans has been higher than it has been for upper-income Americans,” Ludwig said. “Wage growth hasn’t kept pace such that you are worse off than you were 20 years ago.” 

Sharing the wealth generated from a growing U.S. economy is essential to maintaining the middle class and creating a stable society, he added. That can help middle- and low-income Americans “share in the American dream,” Ludwig said. “Unfortunately, it’s going in the wrong direction.”

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