A pay increase has never been worth less if you’re an American worker. A new Census Bureau report revealed that real (emphasis on real) median household incomes fell by 2.3% to $74,580 in 2022.

(“Real income” is the amount of money an individual or household earns after accounting for inflation.)

While Americans received a fairly hefty raise of 6.4% in 2022, it wasn't anywhere enough to offset 7.8% inflation, the highest in over 40 years.

If you factor in taxes, the numbers get even uglier. Real median after-tax income for households declined by 8.8% to $64,240—all while the poverty rate surged by 59% to 12.4%.

But higher costs of living aren't the only thing that robbed Americans of their purchasing power.

The rollback of government support

Uncle Sam spent trillions of dollars during and after the pandemic to support households in need.

Up until recently, millions of Americans depended on those payments to make ends meet. Then, the checks stopped coming.

Both the American Rescue Plan Act and Economic Impact Payments programs expired in 2022. According to the Census Bureau, the rollback explains the steep decline in after-tax incomes in lower-income families.

“Lower post-tax income, particularly at the bottom of the income distribution, also resulted in an increase in income inequality,” the Bureau reported.

Although inflation has moderated this year, nearly half of American adults say they’re experiencing financial hardship, according to Gallup.

With millions of people about to lose their final pandemic lifeline, the situation could get worse.

A rough quarter ahead?

After a more than three-year pause, 43.8 million Americans will have to begin paying back their student loans next month. The problem? About a third of borrowers can expect to pay at least $1,000 monthly.

Here’s another problem: 30% of borrowers say they’ve already reallocated that money elsewhere.

In addition to student loans, credit card balances have topped $1 trillion for the first time. Interest rates on credit cards and personal lines of credit are soaring.

No help from the Fed is on the way either. Economists think interest rates will remain at current levels (5.25-5.50%) or higher by year’s end.

As one beacon of hope, this past May, Americans saw their real wages grow for the first time in two years.

When the sun sets on 2023, real incomes will likely hold up better than last year. But that doesn’t mean most Americans will be rolling in cash—not unless they sell their stocks and real estate.