CNN
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When considering who is living paycheck to paycheck, households with six-figure incomes or more aren’t the first to come to mind. But it turns out that about one-fifth of U.S. households earning more than $150,000 a year are in this situation.

That’s according to a new analysis by Bank of America of anonymized U.S. customers’ banking accounts and spending data.

The authors of the analysis define people who live paycheck to paycheck as people who spend more than 95% of their household income on necessities like gas, food, utilities, internet, public transportation, child care and housing costs.

Across all income levels, households earning less than $50,000 a year had the highest rate, with nearly 35 percent of people living paycheck to paycheck so far this year. However, at higher income levels, the share of households living on a salary gradually declines. For example, the share of households living paycheck to paycheck and earning between $50,000 and $75,000 is only a few percentage points higher than that of households earning more than $150,000.

Traditionally, it seems reasonable to assume that people who earn more would have more money available for unnecessary purchases than those who earn less. So why doesn’t this seem to be the case?

One reason the analysis authors suggest in their report is that “Higher-income households may have purchased larger, more expensive homes and therefore had larger mortgages. And often with larger homes come larger insurance costs, property taxes and utility bills.” .”

The other side of this is that higher-income people may take out larger mortgages “in hopes of getting raises and promotions,” David Tinsley, senior economist at the Bank of America Institute, told CNN. High-income households may be under more financial stress now because they have many young children, but their spending on necessities like child care may decrease once they reach school age, Tinsley said.

But more importantly, Tinsley and his team did not distinguish between different tiers of necessity spending. For example, someone who spent a lot to send their child to an elite preschool would still be flagged as a necessary expense in the analysis. All Tinsley’s team saw was a payment to a child care provider, he said.

However, Bank of America’s analysis underlines the negative impact inflation has on consumers in different income groups. Although the rate at which prices are rising has slowed significantly over the past two years, Americans are paying about 20% more for everything these days than before the pandemic in February 2020.

At the same time, Americans are seeing slower wage growth as the labor market cools. Americans’ median hourly wages rose 4% in September compared with a year ago, while two years ago wages rose more than 5% from the previous year, according to Labor Department data.