Why So Many People Feel Financially Stuck (Even With a Job)

Structural issues, inflation, and income realities

By Michael Zhang

You have a job. You're not unemployed. You show up every day, collect a paycheck, maybe even got a raise last year. So why does it feel like you're falling behind?

You're not imagining it. The disconnect between being employed and feeling financially secure has become one of the defining economic features of this decade, and it's rooted in structural realities that no amount of hustle can overcome.

The Wage-Inflation Gap That Won't Close

Between 2020 and 2024, average annual pay in the United States climbed from roughly $64,000 to $75,600 an 18% jump that looks impressive on paper. But consumer prices rose about 21% over the same period. Once inflation is factored in, the typical American worker is earning about 2.6% less in real purchasing power than in 2020.

Real hourly earnings are still down 0.7% over four and a half years. While wage growth has outpaced inflation since May 2023, signaling improvement, many households are still playing catch-up from the losses they experienced during 2021 and 2022. Workers' paychecks aren't projected to fully catch back up to total post-pandemic inflation until the third quarter of 2026.

Sixty-two percent of employed Americans say their income hasn't kept up with household expenses, according to a December Bankrate survey. Among those who don't expect their finances to improve in 2026, 65% cited inflation as the main reason. Federal Reserve Chair Jerome Powell acknowledged this reality in December, noting that many households are still grappling with higher costs from the inflation surge of 2022 and 2023, even as inflation itself has slowed.

"We're going to need to have some years where real compensation is higher, significantly positive... for people to start feeling good about affordability," Powell said.

The Housing Crisis That Eats Everything

Housing costs explain much of why people feel economically squeezed even when official statistics show improvement. For homes to be as affordable as they were in 2019, incomes would need to rise nearly $50,000, according to recent CNBC analysis.

Monthly mortgage payments on the median-priced home rose to $2,570 last year 40% higher than in 1990 after adjusting for inflation. A buyer would need an annual income of at least $126,700 to afford it along with associated taxes and insurance costs. Only 6 million of the nation's nearly 46 million renters can meet this benchmark.

Renters aren't escaping either. Rents have jumped nearly 28% in the past five years, according to the Bureau of Labor Statistics. For the third consecutive year, the number of cost-burdened renters those spending more than 30% of income on housing reached a record high at 22.6 million renters, representing 50% of all renters. More than 12.1 million spend over half their income on housing.

The burden is creeping up the income ladder. Burden rates exceeded 70% for renters earning $30,000 to $44,999, and doubled to more than 45% for renters earning $45,000 to $74,999. Some desperate renters have turned to "rent now, pay later" services that function like short-term loans, layering fees onto already strained budgets with triple-digit effective interest rates.

The Hidden Costs Keep Rising

Beyond rent and mortgages, homeownership costs are accelerating. Average homeowners insurance premiums rose almost 25% from 2019 to 2024 in real terms. New York City landlords with rent-stabilized units reported an 18.7% increase in insurance costs in just one year, costs that eventually got passed to tenants through rent increases.

In climate-exposed regions, the issue has evolved from cost to access. As insurers exit high-risk markets, a growing number of properties are becoming effectively uninsurable, creating a hard stop for housing markets since mortgages require insurance.

Why This Isn't Just About Working Harder

This isn't a personal failure. It's a structural mismatch between income growth and cost-of-living increases, particularly in non-discretionary categories like housing. Research from the San Francisco Fed shows that house price growth has kept pace with average income growth but not with median income growth. When housing costs track with averages pulled up by high earners, they become increasingly unaffordable for people earning median incomes or below.

The U.S. has a nationwide housing shortfall of nearly 4 million homes. At current construction rates, some regions would need four decades to close the gap. The Midwest would need roughly 40 years; the Northeast wouldn't close it at all under current trends.

The Bottom Line

Feeling financially stuck despite having a job isn't a personal failing or a budgeting problem you can spreadsheet your way out of. It's the predictable result of wages rising 18% while prices rose 21%, housing costs jumping 28%, and insurance premiums climbing 25% all while the structural housing shortage ensures these pressures won't ease soon. 

Your paycheck might be bigger. But so is everything it needs to cover.