Skip to main content

The pursuit of happiness … if you can afford it

How the pandemic likely accelerated consumer bifurcation in America

In the United States, trends around income distribution haven’t painted a rosy picture for quite some time. In our earlier analysis, The great retail bifurcation, we found that in the decade following the great recession, income among wealthier Americans was growing 13 times faster compared to lower-income consumers.1

An unrelenting pandemic and inflation have only exacerbated the financial challenges faced by many lower-income earners. Over the past two years, wealthier Americans freely pivoted to remote work, with many seeing the value of their assets such as real estate and stock portfolios balloon in value. At the opposite end, millions of mostly low-wage workers were more exposed to furloughs, layoffs, and even faced a higher risk of death from COVID-19. More recently, the world has been experiencing some of the highest inflation rates in decades.2

In this article, we explore nearly two years of data from Deloitte’s Global State of the Consumer Tracker to better understand the pandemic’s impact across income groups—exploring trends in financial sentiment, shifting priorities, and how spending behaviour among lower-income consumers might be evolving in response to mounting financial pressures.

Concerned about upcoming bills, and wary about the broader future


Over the past two years, the percentage of lower-income Americans concerned about making upcoming payments has climbed steadily (figure 1). At the same time, immediate financial concerns among the country’s highest earners remained unchanged and even improved slightly among average earners.

As of December 2021, four in 10 lower-income consumers (individuals earning US$40,000 or less annually) in the United States were concerned about making coming payments. As some would expect, this metric has remained significantly higher compared to higher-income earners. But it’s also been much more volatile. Since the pandemic started, it has hit 50% two different times. Stimulus payments likely drove some of that volatility. After hovering around 40% for much of 2021, the percentage of lower-income earners struggling to make ends meet spiked to 50% in late summer and early fall—coinciding with the sunsetting of federal and many state-level stimulus programs. Sensitivity to these stimulus programs expose the harsh financial reality many lower-income earners face in the United States.

But the bifurcation of the US consumer isn’t just characterised by those living with immediate financial concerns. It’s perhaps even more apparent in optimism about the future—a state of mind now mostly reserved for America’s highest earners. In the United States, three in four higher-income earners are optimistic that their financial situation will improve within the next three years (figure 2). Among lower-income earners, this figure drops to only half.

The sentiment among middle-income consumers is perhaps even more telling of today’s bifurcation story. The American Dream—or the belief in almost guaranteed upward mobility—was once synonymous with a booming postwar middle class. Today, there is virtually no difference in financial optimism among low and middle-of-the-road earners.

Today’s media headlines often focus on the top 1% to expose glaring inequality. But these stark differences—both in immediate financial concern and longer-term optimism—are measurable across even traditional income bands.

Adapting to pandemic pressures


For many, an unrelenting two years of pandemic challenges proved enough to inspire some rethinking around priorities and lifestyle. In the first edition of this state of the consumer article series, we explored how the stress of the pandemic experience was likely driving many to reprioritise the importance of things like working harder and earning more—among other aspects of life.3

But through the lens of income, the freedom to make quality-of-life adjustments seems strongly contingent on affluence. In the United States, for example, we found that adults who felt they were spending more time to enjoy today (37%) strongly outnumbered those citing that they were working harder to get ahead (27%) (compared to one year ago). These signals around the reprioritisation of work are particularly surprising considering the financial challenges many faced throughout the pandemic, sunsetting stimulus programs, and record inflation.

But perhaps more interesting is not how many people are rethinking things like work and earning more—but who these people are. Income plays a big role. Higher-income earners are significantly more likely to deprioritize working harder (figure 3). In parallel with headlines around the “Great Resignation,” these priority shifts continue to lend some credence to the notion that the pandemic induced a bit of an existential rethink around work. But while these shifts were measured across all income bands, they were much more likely to occur among those who can afford it.

The impact on spending behaviour


The past two years have likely accelerated a bifurcation trend that has been playing out for decades. As financial pressures mount—including stagnating income and historical inflation—how are spending behaviors among lower-income earners evolving?

For insight, we look to spending intentions4 across 12 different purchase categories, represented as a share of wallet (figure 4).

Not surprisingly, lower-income earners intend to allocate a significantly smaller share of their total spending to more discretionary categories—roughly 30%—compared to about 40% among higher-income earners (figure 4). This includes categories such as recreation and entertainment, leisure travel, restaurants, electronics, as well as saving and investing.

Housing continues to have the biggest impact on disposable income. For the month ahead, lower-earning Americans plan to spend nearly a quarter of their entire budgets on housing alone. This figure drops to just 13% among the highest earners. Similar share-of-wallet disparities were measured in categories such as groceries, despite the gap being much smaller.

Facing rising financial challenges, including rising prices for categories such as housing and groceries on which lower-income earners are already spending disproportionately more, where are lower-income consumers the most likely to pull back? The data suggests health care, savings, and leisure travel.

In health care, we expected a trend similar to housing and groceries for lower-income earners—where more essential categories command a larger share of spending. But this isn’t the case. In fact, when using multivariate models to control for age, household composition, and other variables that typically influence health care spending, lower-income earners plan to spend a significantly smaller share of wallet on health care compared to higher-income earners. These signals strongly suggest that health care spending is deprioritised as income decreases.

The savings gap is also significant. While high earners plan to save just as much as they spend on housing every month—13%—lower-income earners are saving just 8%—even less than they plan to spend on groceries. For lower-income earners, an inability to save is driving many to credit to make ends meet. As of December 2021, nearly half (45%) of lower-income earners were concerned about their credit card debt, a figure that barely improves among average earners.5

Constant change


Consumer bifurcation isn’t a new story. In fact, it’s very likely this shift has already had a hand in shaping the consumer industry for quite some time. For example, we’ve seen revenue growth among price-based and premier retailers outpace more balanced retailers for years.6 Airlines have been busy segmenting their cabins to create a wider mix of high- and lower-priced fares. It remains to be seen whether financial pressures on lower-income earners potentially ease as the pandemic gradually loses its ability to disrupt the economy. But for consumer companies, it’s likely that business models will need to remain in a constant state of change as the US consumer perpetually evolves.



Deloitte Consumer leaders work with global brands to create winning strategies for the near future in the Automotive; Consumer Products; Retail; and Transportation, Hospitality & Services sectors. Our mission is to use our proprietary data and judgement to help you get closer to your consumers. 

Learn more

  1. Kasey Lobaugh et al., The great retail bifurcation: Why the retail “apocalypse” is really a renaissance , Deloitte Insights, accessed February 1, 2022.

    View in Article
  2. Gwynn Guilford, “US inflation hit 7% in December, fastest pace since 1982 ,” Wall Street Journal, January 12, 2022.

    View in Article
  3. Stephen Rogers and Anthony Waelter, Is the world really going through some great rethink? How the pandemic has reshaped people’s priorities and what it means for the consumer business , Deloitte Insights, December 9, 2021.

    View in Article
  4. Share of wallet: Study respondents are asked to select the predetermined spending range that best represents their estimated spending for the next four weeks across fifteen product categories. Midpoints of spending ranges are used to calculate planned spending currency amounts in each category and aggregated to create a share of wallet. Some categories have been grouped to improve the share-of-wallet visual—Groceries, restaurants and takeout, personal care Items, everyday household goods, and recreation and entertainment are asked based on a two-week outlook (versus a four-week one).

    View in Article
  5. Deloitte Global State of the Consumer Tracker.

    View in Article
  6. Lobaugh et al., The great retail bifurcation.

    View in Article

The authors would like to thank Marcello Gasdia for his contribution to this article.

Cover image by: Sylvia Yoon Chang

Did you find this useful?

Thanks for your feedback

If you would like to help improve further, please complete a 3-minute survey

Related content