For low-income households, it’s no surprise that a large proportion of their spending goes to basic needs, such as housing and food, while high-income households have traditionally had more discretionary spending. But how do families cope when the cost of housing goes up, or the cost of transportation goes down? And how have their budgets adjusted in light of these changes in order to pay for everything?
A new report from The Hamilton Project of the Brookings Institution looks at how the composition of household spending across income levels has changed over the past 30 years. Analyzing data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, the report found that budgets have indeed shifted—particularly for low-income families.*
The report found that low-income households are devoting a greater share of their budget to basic needs compared with 30 years ago. In fact, low-income and middle-income households (defined as the lowest and middle quintiles of the income distribution) now spend roughly 80 percent of their budget on housing, food, transportation, health care, and clothing. For low-income households, 40 percent of their budget went to housing—a 5.5 percent increase from 1984.