It always feels like the little guys can never get ahead, but new data from Bank of America Institute shows that things may be turning in their favor.
In June, lower-income after-tax wage growth rose to 4.1% from June 2025, the fastest pace since July 2023, according to Bank of America transaction data. The lower-income wage growth outpaced middle-income wage growth of 3.4% over the same period and nearly matched higher-income growth of 4.2%. Higher-income wage growth actually slipped “meaning their previous lead over lower-income households has largely disappeared,” Bank of America said in its report.
“For much of the past few years, higher-income households were pulling further ahead. Now that gap is narrowing,” said David Tinsley, senior economist for Bank of America Institute, and one of the authors of the report. “Faster pay growth for lower-income workers suggests consumer spending power is becoming more broadly shared across households again.”
Coffee Cup Minimum Wage
Why are lower-income earners seeing a boost?
A couple of reasons may be helping turn the landscape for low-income earners, Bank of America economists said.
Increased job-switching that often leads to larger pay gains when changing employers could be helping narrow the wage growth gap, they said. Job switching was happening at a faster rate in the three months leading up to June this year than last year, data show.
“And while this is true across income cohorts, lower-income households have also been getting larger pay bumps ofaround 12%, compared to 9% for higher-income households, when they move jobs,” the economists said.
President Donald Trump’s signature tax and spending bill signed last year also could be providing a boost. Some lower- and middle-income households have decided to reduce their tax withholdings this year to reflect changes from the One Big Beautiful Bill Act (OBBBA), thereby boosting their take-home pay growth, they wrote in the report.
Can the pay boost last?
It’s hard to say for certain if low-wage earners will rise and stay at the top of the earnings growth chart. However, if the underlying jobs market stays firm and low- and middle-income earners are indeed benefitting from lower tax withholding in each paycheck, Bank of America economists said they can see an improving outlook for them.
Advantages from OBBBA in “their take-home pay growth…could last for a year,” they said.
Meanwhile wage growth from the abilty to switch jobs in a solid jobs market “may last as long as the improvement in the labor market continues,” they wrote. But they cautioned low-income wage growth “would be vulnerable to a pullback if labor demand slows.”
