ALICE Essentials Index 2024: Measuring Inflation for Basic Needs

ALICE ESSENTIALS INDEX 2024 MEASURING INFLATION FOR BASIC NEEDS 2024 National Report | UnitedForALICE.org ABOUT UNITED FOR ALICE AND OUR PARTNERS United For ALICE is a national research organization driving solutions to financial hardship. Through the development of the ALICE ® (Asset Limited, Income Constrained, Employed) measures, a comprehensive, unbiased picture of financial hardship has emerged. With a commitment to racial and economic justice, ALICE partners convene, advocate, and collaborate on solutions that promote financial stability at local, state, and national levels. This grassroots ALICE movement, led by United Way of Northern New Jersey, has spread to 31 states and the District of Columbia. Learn more about the ALICE movement here. To develop and update the ALICE metrics, ALICE researchers collaborate with a Methodology Advisory Committee composed of experts from across the country, drawn from the Research Advisory Committees in ALICE partner states. This collaborative model ensures that all ALICE products and tools are based on unbiased data that is transparent, replicable, current, and sensitive to local context. To create this Report, our team of researchers worked with an ALICE Essentials Index Research Advisory Committee composed of experts from ALICE partner states. This work is guided by our rigorous methodology, which is updated biennially with experts from the ALICE Methodology Advisory Committee. Director and Lead Researcher: Stephanie Hoopes, Ph.D. ALICE Research Team: Andrew Abrahamson; Ashley Anglin, Ph.D.; Catherine Connelly, D.M.H., M.A.; Max Holdsworth, M.A.; Dana Isaac KEY TERMS z ALICE: Asset Limited, Income Constrained, Employed — households that earn above the Federal Poverty Level (FPL) but cannot afford the basic cost of living in their county. Despite struggling to make ends meet, ALICE households often do not qualify for public assistance. z ALICE Household Survival Budget: Reflects the minimum costs of household necessities (housing, child care, food, transportation, health care, and technology) plus taxes, adjusted for different counties and household types z ALICE Threshold of Financial Survival: Derived from the Household Survival Budget, the minimum average income that a household needs to afford basic costs, calculated for all U.S. counties z ALICE Essentials Index: A measure of the average change over time in the costs of essential goods and services z Below ALICE Threshold: Includes households in poverty and ALICE households combined Learn more about our methodology at UnitedForALICE.org/Methodology ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 1 ALICE Essentials Index Description and Sources% of Basket 2007–2023 % Increase HousingFair Market Rent (40 th percentile, utilities included) for an efficiency apartment (single adult), one-bedroom apartment (two adults), or two-bedroom apartment (two adults, two children), adjusted in metro areas using the American Community Survey (ACS) Sources: ACS metro housing costs and U.S. Department of Housing and Urban Development 34%76% Child Care Cost for registered Family Child Care Homes for one preschool-age child (3–4 years), representing the midpoint of cost between infant and afterschool care Source: State agency responsible for child care reporting (e.g., Child Care Aware of Washington, Maryland Family Network) 7%57% Food USDA Thrifty Food Plan by age, with county variation from Feeding America for three household compositions (two adults, two adults and two children, and one adult 65+) Sources: Feeding America; U.S. Department of Agriculture (USDA) 23%37% Transportation Operating costs for a car (average daily miles by age, cost per mile, license, fees, and insurance) for three household types (two adults, two adults and two children, and one adult 65+) Sources: AAA, Federal Highway Administration, The Zebra (car); Consumer Expenditure Survey (CEX) (public transportation) 17%66% Health Care Health insurance premiums based on employer-sponsored plans plus out-of-pocket costs for households with $40,000–$69,999 annual income by age, weighted with the poor-health multiplier. For the ALICE 65+ Budget, cost of Medicare Parts A and B, out-of-pocket costs, plus average out-of-pocket spending for the top five chronic diseases as reported by CMS. Sources: Centers for Medicare & Medicaid Services (CMS); CEX (health); Medical Expenditure Panel Survey (MEPS) 15%75% Technology Basic broadband internet at home and a smartphone plan with unlimited data for each adult in a household Source: Consumer Reports 3%55% (2016-2023) ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 2 OVERVIEW: BASIC COSTS ARE INCREASING FASTER THAN OVERALL INFLATION Inflation is one of the most widely utilized indicators of the health of the U.S. economy. When prices increase faster than wages, the stock market, and other sources of income, people’s purchasing power decreases and economies struggle. This is especially challenging for families on a tight budget or a fixed income, including households that are ALICE — Asset Limited, Income Constrained, Employed, with income above the Federal Poverty Level (FPL) but below the cost of basics included in the ALICE Household Survival Budget. ALICE households, combined with those living in poverty, make up the population of struggling U.S. households with income below the ALICE Threshold. Across the U.S. in 2022, 42% of households had income below the ALICE Threshold: 13% were in poverty, and another 29% were ALICE. The standard measure of inflation in the U.S., the Bureau of Labor Statistics’ Consumer Price Index (CPI), tracks the retail price of more than 200 categories of goods and services purchased by consumers at all income levels in 75 urban areas. The CPI is often used as the North Star to guide economic policies, including monetary policy, setting the FPL, benchmark increases for Social Security and retirement benefits (for veterans and federal civil service retirees), and determining eligibility for government assistance programs. Yet despite being used to guide policy for low-income households, the CPI conceals the changes in prices of the smaller number of goods and services that are essential to meeting basic needs for households below the ALICE Threshold. The ALICE Essentials Index aims to fill this gap and bring the reality of ALICE household costs to the forefront. The Index tracks only the cost of six categories of basic goods and services essential to living and working in the current economy: housing, child care, food, transportation, health care, and basic technology. And it shows that the rise in the cost of these

being used to guide policy for low-income households, the CPI conceals the changes in prices of the smaller number of goods and services that are essential to meeting basic needs for households below the ALICE Threshold. The ALICE Essentials Index aims to fill this gap and bring the reality of ALICE household costs to the forefront. The Index tracks only the cost of six categories of basic goods and services essential to living and working in the current economy: housing, child care, food, transportation, health care, and basic technology. And it shows that the rise in the cost of these household basics has consistently outpaced growth in the CPI’s larger basket of goods and services for more than a decade (F ig u re 1). Figure 1. ALICE Essentials Index and CPI, United States, 2007–2024 Note: In this figure, the ALICE Essentials Index was adjusted to the CPI base value of 207 in 2007. As shown by the dotted lines, ALICE Essentials Index rates for 2023 and 2024 are projections; for details, see Appendix. CPI 2024 is preliminary (based on data through March 2024). Sources: ALICE Essentials Index, 2007–2024; Bureau of Labor Statistics, 2007–2024—CPI; Bureau of Labor Statistics, 2007–2023—Occupational Employment and Wage Statistics 200 220 240 260 280 300 320 340 360 Index Score 2007 2008 2009 2010 2011 2012 201 3 201 4 201 5 201 6 201 7 201 8 201 9 2020 202 1 2022 2023 2024 ALICE Essentials Index–National Consumer Price Index ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 3 ALICE INFLATION BY TIME PERIOD Inflation and the high cost of living have been front and center in the news over the past few years. According to a recent Gallup Poll, concerns about inflation reached a new high in April 2024, with 41% of Americans naming inflation as the most important financial problem they are facing. Households across all income levels have felt the impact of inflation doubling following the pandemic. Yet the ALICE Essentials Index shows that households below the ALICE Threshold have not only seen a bigger increase recently but have been struggling with high inflation for the last decade and a half. From 2007 through 2019, the CPI reported an annual inflation rate of roughly 2%, followed by a higher annual rate of 2.9% during the period of 2019 to 2021, and then reaching 6.1% during the most recent period (2021 to 2023). In comparison, the ALICE Essentials Index was nearly double the CPI during the Great Recession (3.3% annual increase from 2007 to 2010). Both measures dropped below 2% during the Early Recovery (2010 to 2016); then the ALICE Essentials Index surged past the CPI again during the Late Recovery (2016 to 2019), with an annual rate of 3.7%. During the last five years, the rate of inflation has been volatile: The ALICE Essentials Index fell to 2.6% (2019 to 2021) before jumping to an annual rate of 7.3% from 2021 to 2023 (projected) (Figure 2). Figure 2. Annual Rate of Inflation by Time Period, United States, 2007–2023 Note: The ALICE Essentials Index rate for 2023 is a projection; for details, see Appendix. The 2024 ALICE Essentials Index is a projection based on partial data and is therefore not included in this figure. Sources: ALICE Essentials Index, 2007–2024; Bureau of Labor Statistics, 2007–2024–CPI 3.3% 1.9% 3.7% 2.6% Projected 7.3% 1.7% 1.6% 2.2% 2.9% 6.1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Great Recession 2007–2010 Early Recovery 2010–2016 Late Recovery 2016–2019 Pandemic 2019–2021 Current 2021–2023 ALICE EssentialsConsumer Price Index Annual Rate of Increase ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 4 There are two key explanations for the difference in inflation rates between the ALICE Essentials Index and the CPI: The price of many non-essential goods has remained relatively unchanged for years. Mass-production and a global market over the last few decades helped keep costs low before 2020, especially for apparel, vehicles, and electronics. This also helped keep CPI rates low; but most of these items were not included in the ALICE Essentials Index. When the pandemic hit, supply chain disruptions increased costs for a wide range of products included in both the ALICE Essentials Index and the CPI. There are different rates of growth at different price points. Even within the categories that are common across the two indices (such as housing and food), the ALICE Essentials Index includes a narrower range of items, many of which had very different price trajectories than their higher-end counterparts. For example: z Housing accounts for a similar portion of both the CPI (36%) and the ALICE Essentials Index (34%). Yet the CPI includes the cost of high-end rental and owner accommodation, both of which stagnated during the housing crisis of 2008 through 2013. From 2007 to 2023, CPI shelter costs increased by 56%. In comparison, the cost of efficiency and one- and two-bedroom rental apartments at the 40 th rent percentile in the ALICE Essentials Index has consistently increased, especially during and since the COVID-19 pandemic. Housing costs in the ALICE Essentials Index increased 76% from 2007 to 2023. z Food accounts for a smaller portion of the CPI (14%) than of the ALICE Essentials Index (23%). Both indices include food at home, such as breakfast cereal, milk, coffee, and chicken; the costs of those basics have increased steadily. But the CPI also includes higher-end products that would not be affordable in the Thrifty Food Plan, like wine and full-service meals and snacks away from home, and the costs of those products have increased more rapidly in recent years. ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 5 INFLATION AND WAGES Since the end of the Great Recession, many lower-wage jobs have seen wage increases. From 2010 to 2022, the median hourly wage increased 55% for pharmacy aides, 48% for both retail salespersons and child care workers, 51% for tellers, and 53% for cashiers. Most of the growth occurred since 2019, with historic recent wage increases for low-income workers. Yet measures

in the Thrifty Food Plan, like wine and full-service meals and snacks away from home, and the costs of those products have increased more rapidly in recent years. ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 5 INFLATION AND WAGES Since the end of the Great Recession, many lower-wage jobs have seen wage increases. From 2010 to 2022, the median hourly wage increased 55% for pharmacy aides, 48% for both retail salespersons and child care workers, 51% for tellers, and 53% for cashiers. Most of the growth occurred since 2019, with historic recent wage increases for low-income workers. Yet measures of household and consumer sentiment suggest dissatisfaction with the current economy, and ALICE workers report ongoing frustration from being unable to get ahead of expenses, despite higher incomes. The following factors help explain why: z ALICE workers are playing catch-up. Recent wage gains do not make up for over a decade of stagnating wages. For example, in 2010, child care workers in the U.S. earned a median wage of $9.28 per hour ($19,300 annually for full-time work) which was $12,763 short of the annual Household Survival Budget for one adult and one school- age child ($32,063). By 2022, the median wage for child care workers had increased by a substantial 48% to $13.71 per hour ($28,520 annually, full-time). Yet the annual Household Survival Budget for one adult and one school-age child also grew, by 46%, to $46,932. These essential workers were $18,412 short of basic costs in 2022 — even further behind than they were in 2010 (Figure 3). z Wages are increasing at different rates across occupations. Not all workers are experiencing high rates of wage growth. Of the top 20 most common occupations in the U.S. by total employment, half saw median annual wages increase from 2019 to 2022 at a rate faster than the ALICE Essentials Index: retail salespersons, personal care aides, fast food and counter workers, cashiers, laborers and movers (hand), stockers and order fillers, janitors and cleaners, waiters and waitresses, maintenance and repair workers, and miscellaneous assemblers and fabricators. (For details, see our 2024 Update, ALICE in the Crosscurrents.) z Many workers struggle to find full-time employment. An increase in hourly wages does not always translate to higher take-home pay every month. Nationally, about one-quarter (22%) of the population (age 16+) had the security of a full-time job with a salary in 2022. Of those in the labor force, over half (60%) were paid hourly and/or worked part time. Many jobs have fluctuating schedules and are seasonal. If workers are given fewer hours, their monthly earnings may not increase. (For labor force statistics at the state and county levels, visit UnitedForALICE.org.) THE ALICE WAGE TOOL United For ALICE’s Wage Tool provides detailed data on wages at the state and county level. Explore the interactive map that identifies the counties where a certain hourly wage can support the Household Survival Budget for a selected household type. ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 6 Figure 3. Child Care Worker Wages Compared to Household Survival Budget, United States, 2010 and 2022 Note: The Household Survival Budget is the budget for Franklin County, Ohio (which includes Columbus), roughly the median county in the U.S. for income, and shows the annual total ALICE Household Survival Budget for one adult and one school-age child. Sources: ALICE Household Survival Budget, 2010 and 2022; Bureau of Labor Statistics, 2010 and 2022—Occupational Employment and Wage Statistics Despite substantial wage growth, no low-wage jobs caught up to basic costs from 2010 to 2022. In 2010, 240 occupations listed by the BLS had median annual wages that could not support the median Household Survival Budget for one adult and one school-age child. Yet despite wage increases in all but six of these occupations from 2010 to 2022, none of them could support the median Survival Budget in 2022 either. These jobs include farmworkers and laborers, crop, nursery, and greenhouse workers, personal care and service workers, passenger attendants, grounds maintenance workers, and counter and rental clerks, whose wages all increased by more than 60% but still couldn’t support the Household Survival Budget in 2022. Other occupations actually lost ground during this time, even though their wages grew. For example, highway maintenance workers, dental assistants, and medical appliance technicians could afford the median Household Survival Budget for one adult and one school-age child in 2010, but not in 2022. A sample of these occupations is shown in Figure 4, comparing their wages to the ALICE Household Survival Budget. $0 Child Care Worker WageHousehold Survival Budget Annual Costs and Wages $32,063 $46,932 $19,300 $28,520 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 20102022 ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 7 Figure 4. Median Annual Wages of Selected Common Occupations vs. Annual ALICE Household Survival Budget, United States, 2022 Note: Annual total ALICE Household Survival Budget is for one adult and one school-age child. The latest data for the ALICE Threshold is from 2022. Sources: ALICE Essentials Index, 2007–2022; ALICE Threshold, 2007–2022; American Community Survey, Public Use Microdata Sample (PUMS), 2007–2022; Bureau of Labor Statistics, 2007–2022—Occupational Employment and Wage Statistics $44,930 $44,820 $42,160 $40,750 $37,780 $37,780 $37,060 $36,460 $36,380 $35,750 $35,330 $35,240 $34,750 $34,670 $33,270 $31,030 $30,600 $28,520 $28,240 $2,002 $2,112 $4,772 $6,182 $9,152 $9,152 $9,872 $10,472 $10,552 $11,182 $11,602 $11,692 $12,182 $12,262 $13,662 $15,902 $16,332 $18,412 $18,692 $- $10,000 $20,000 $30, 000 $40, 000 $50, 000 Highway Maint enance Worker s Dent al Assistants Medical Appliance Technicians Construct ion Labor ers Agri cultura l Equipment Operators Customer Service Represent atives Occupational Therapy Aides Prot ective Service Wor kers Tellers Textile Machine Oper ator s Preschool Teachers Sl aughterers and Meat Packers Security Guards Personal Care Workers Pharmacy Aides Tele marketers Retail Salesper sons Chi ldcare Wor ke rs Cashiers 2022 Annual Full-Time SalaryGap to Survival Budget ALICE ESSENTIALS INDEX UNITED STATES | JUNE 2024 8 INFLATION BY GEOGRAPHY The cost of basic household goods varies substantially by geography across the U.S. For example,