For many Hispanic households, rising income is being squeezed by growing debt payments, leaving less money for savings, emergencies, and everyday expenses.
A raise is supposed to create a little breathing room.
Maybe there is more money for groceries. A car repair can be handled without reaching for a credit card. A family can put a little more into savings or finally catch up on a bill.
But a new analysis from The Century Foundation and Protect Borrowers suggests that for many working households, a significant share of those income gains is already being claimed by rising debt payments.
The analysis finds that real household take-home income increased 1.7% over the three years studied, while required consumer debt payments increased 14.8%.
Debt payments therefore grew more than eight times as fast as household income.
For the typical one-earner household, the researchers estimate that 52 cents of every dollar of real income growth went toward higher debt payments.
That helps explain why a bigger paycheck does not always translate into a household feeling financially better off.
For California workers, particularly Latino households already carrying substantial unsecured debt, the finding provides another way to look at the squeeze between earnings and the cost of everyday life.
The new analysis looks at credit records for millions of working-age adults and combines those records with neighborhood income data.
The researchers estimate that required consumer debt payments now consume about 10% of after-tax household income among the workers in their analysis, up from 8.9% at the end of 2022.
At the same time, real household take-home income increased only 1.7%.
The difference matters because income growth is useful only to the extent that a household can actually use it.
A worker may earn more but still have little additional money available after required payments are made.
The researchers estimate that a typical one-earner household gained about $109 a month in real take-home income over the period studied, while its monthly debt payments increased by about $57.
In other words, more than half of that income gain was absorbed by debt.
For a two-earner household experiencing the average increase in debt payments for both workers, the researchers estimate that the additional debt payments could consume essentially the entire household’s real income gain.
The family gets the raise.
Much of the money is already spoken for.
Hispanic workers show a higher measured debt burden
The burden is not distributed evenly across the groups examined in the analysis.
The researchers estimate that required consumer debt payments equal 10.7% of after-tax household income for Hispanic workers.
The comparable figures are 9.4% for white workers, 6.8% for Asian workers and 13.3% for Black workers.
These figures should not be read as the amount every household in each group spends on debt. They are estimates produced by the researchers using their underlying credit and income data.
But they show a substantial difference in the share of household income being consumed by required consumer debt payments.
The researchers also found that differences persisted among borrowers with strong credit, suggesting that creditworthiness alone does not explain the disparities.
And there is an important limitation.
The researchers estimate that their data capture roughly 85% to 90% of household debt payments. Some forms of debt—including certain personal loans, most Buy Now, Pay Later obligations and some medical debt—are not fully represented.
The researchers say the debt missing from their dataset is concentrated among lower-income households and disproportionately among Black and Hispanic households.
That means the measured burden may not capture every debt payment some households are making.
The national analysis does not measure California households separately.
But California data provide important context for understanding why the findings matter here.
The Public Policy Institute of California’s 2026 wealth report finds that 41% of California households have credit-card debt, making it the most common form of borrowing not connected to a home, vehicle or other property.
PPIC’s underlying research also found that Latino households are more likely to carry unsecured debt than white and Asian households. About 59% of Latino households reported unsecured debt, compared with about 45% of white and Asian households. Credit-card debt was reported by about 50% of Latino households, compared with roughly 35% of white and Asian households.
The California data do not mean the national debt-payment figures can simply be applied to California or to Latino households here.
They cannot.
The datasets and measurements are different.
What the two bodies of research do show is that debt is an important part of the financial picture for many California households and that Latino households have relatively high rates of certain forms of unsecured and credit-card debt.
That makes the national finding worth paying attention to in California.
Credit cards and car loans are doing much of the work
Not all consumer debt affects a household in the same way.
According to the new analysis, credit cards account for the largest share of consumer debt-payment obligations, at about 44%.
Auto loans account for roughly 40%.
The median monthly auto-loan payment in the analysis was $471.
For a worker who depends on a car to get to work, an auto payment may be difficult to avoid. In California, where many workers face long commutes and limited transportation alternatives, that monthly obligation can become a permanent part of the household budget.
Credit cards create a different problem.
A family may use a card to cover an emergency, a medical expense, groceries or a repair. The immediate problem gets solved, but the resulting balance can create another monthly obligation.
That changes what a raise can accomplish.
Instead of creating room for savings or other expenses, some of the additional income may go toward payments on expenses that happened months or even years earlier.
For more context on how debt can affect Latino households, see Parriva’s earlier coverage of credit-card debt cycles.
The researchers found an even larger gap among workers living in lower-income neighborhoods.
For workers in the lowest-income neighborhoods, the analysis estimates that 72% of real income gains were absorbed by higher debt payments.
For workers in the highest-income neighborhoods, the figure was 32%.
That difference matters because the same dollar of additional debt payment can have very different consequences depending on how much money remains after basic expenses.
A household with substantial savings may be able to absorb a higher monthly payment.
A household already balancing rent, food, transportation, utilities and child-care costs has less room.
The result is that two workers receiving similar raises can experience very different financial outcomes.
Why the paycheck can grow without creating breathing room
The simplest way to understand the research is to separate income growth from available income.
A household can earn more.
But if required payments also rise, the amount of money left for everything else may increase much more slowly.
That distinction is particularly important when looking at debt.
A required payment is not an optional expense that can simply be postponed without consequences. It has to be made every month.
So when debt payments rise faster than income, they take up an increasing share of the household’s financial capacity.
That can leave less room for savings, emergencies or reducing other debt.
The researchers describe this concept through a proposed measure called Real Income Net of Debt, which attempts to account for the effect of required debt payments when evaluating changes in household financial resources.
It is a research framework, not a replacement for the income statistics people see on their paychecks.
But it points to a question that traditional income numbers can miss:
How much of the additional money does a household actually get to keep?
What the research does and does not tell us
The new analysis does not show that every worker is financially worse off when receiving a raise.
It also does not establish that rising debt payments are the only reason households may feel financially squeezed.
Housing, food, transportation, health care, child care and other costs can all affect how far a paycheck goes.
And the study’s Hispanic figure is an estimate for the workers represented in its analysis—not a measure of every Hispanic household in California.
But the central finding is straightforward.
Over the period examined, required consumer debt payments increased substantially faster than real household take-home income.
For Hispanic workers in the analysis, required consumer debt payments represented an estimated 10.7% of household take-home income.
And California data show that credit-card and other unsecured debt are already common among Latino households.
Taken together, the research offers a different way to think about a raise.
The question is not only whether the paycheck gets bigger.
It is how much of that increase remains available after the bills that cannot be avoided are paid.
For a household carrying significant debt, that difference can determine whether a raise actually creates breathing room or simply helps cover what was already owed.
