Many Kentuckians are struggling to afford the cost of living. This problem is not new, but prices have spiked in recent years while many workers’ wages and household incomes have not kept up. New federal policies will raise the prices of essential needs further while cutting programs and services that help Kentuckians get by.
Today, KyPolicy released a report, “Building a Kentucky Workers Can Afford,” containing a range of affordability policies that the state can implement to improve job quality and ease growing kitchen table burdens. Here’s why those priorities are so important.
Household costs are going up
Since 2020, costs have risen substantially for a variety of major household expenses. The Consumer Price Index for all items in the East South Central Region (which includes Kentucky, Alabama, Mississippi and Tennessee) shows prices are up 27% since 2020, as shown in the graph below. That includes particularly sharp increases in the cost of transportation, which is up 36%; energy, up 33%; shelter, which consists of housing and related costs including insurance, up 33%; and food, up 28%, including a 37% increase for meat, poultry, fish and eggs.
Inflation in household costs was especially high during the pandemic period from 2021-2023 as supply chain backups, shifts in consumer demand from services to goods, and opportunistic price hikes in monopolized industries resulted in a sudden rise in prices. Since then, the pace of cost growth has slowed, but Kentuckians are left with much higher prices for necessary expenses than five years ago.
Now, across-the-board tariffs threaten to bring new price increases on many goods. The One Big Beautiful Bill Act (OBBBA), which passed Congress this summer, will end food and healthcare benefits for many and pass higher costs on to others, while its cuts to clean energy investments are expected to further raise the cost of electricity.
Wages are suppressed and incomes are inadequate
For decades , wages for American workers have not kept up with growth in worker productivity. A wide variety of policy decisions have suppressed wages for most workers, including weakened labor laws, inaction to raise the minimum wage, unfair trade policies and a failure to enact fiscal and monetary policies that maintain a consistent economy of full employment.
And in many cases, wages and incomes are not keeping up with the recent growth in costs described above. Median household income is down 4.8% in Kentucky since 2020 after adjusting for inflation, while median wages have fallen 3.3%.
The above chart actually understates the decline in purchasing power Americans have felt over the last few years. During the COVID-19 pandemic, the federal government provided a variety of aid programs that are not counted in the Census Bureau’s measure of household income, including an expansion of the child tax credit, stimulus payments and food, health care, utility and housing assistance. These benefits increased household economic security but their expiration after the pandemic worsened well-being. For example, the Kentucky child poverty rate measured using a method that takes public benefits into account was cut in half during COVID-19. But as Congress let that aid go away, hardship redoubled.
Federal and state budget cuts have also reduced the help available to Kentuckians. The cuts in SNAP benefits and in Medicaid in the OBBBA will take food benefits and health coverage from hundreds of thousands of Kentuckians, further squeezing already meager incomes. Layoffs and the defunding of federal programs have caused adversity for many of the 23,000 federal employees who live in the commonwealth, and thousands more whose work was funded through federal grants that have been slashed or cancelled.
At the same time, the state has cut cash assistance for tens of thousands of low-income kids and their families in the Kentucky Transitional Assistance Program (KTAP). Other cuts may be on the horizon due to a $305 million state budget shortfall caused by a weakening economy and multiple rounds of individual income tax cuts. Unemployment for young and Black workers is rising, but in 2022 the Kentucky General Assembly eliminated 10 weeks of eligible unemployment benefits for laid-off employees.
Workers and families are struggling
Higher prices on essentials combined with inadequate wages and reduced public support add up to more pain for household budgets. The Economic Policy Institute’s (EPI) Family Budget Calculator estimates the income needed in localities across the country to afford a “modest yet adequate standard of living” that covers the basics like housing, food, health care, childcare and transportation. As shown in the graph below , even median family income is not enough to cover those costs in many cases. For example, the local median is not adequate to pay for a basic family budget for one adult with one child in Knott County, and far less than is needed for two adults and two children. Affordability is a problem that challenges Kentuckians across rural, urban and suburban communities.
Detailed estimates by county and family size can be found in the map below, and full data for every county and metropolitan area is accessible through the calculator: https://www.epi.org/resources/budget/
While even families with median incomes struggle, many Kentucky workers make far less than that. A full 20% of Kentucky workers had wages of $14.95 an hour or less in 2024 according to EPI, the equivalent of $29,900 annually assuming full-time employment (which is not always available). That is less than EPI’s estimate of the cost of a basic family budget for a single adult with no children in every Kentucky county.
These challenges are worsening now due to a weakening economy and federal policy choices. Household debt and delinquencies are rising, while consumer confidence is falling.
Kentuckians need an affordability agenda
Strained living conditions are not inevitable: they are the direct result of public policy. As KyPolicy’s new report outlines, many policy options are available at the state level to directly ease the cost of living and grow good jobs that make life more affordable.
Leaders in the 2026 Kentucky General Assembly can and should prioritize an affordability agenda that meets the moment. Through deliberate action, leaders can help address the job quality and cost of living concerns that strain Kentucky workers and families every day.
