Why Higher Incomes Are Not Making People Feel Richer

There is a strange contradiction at the heart of modern prosperity. People have access to technology, healthcare, travel, entertainment, and consumer goods that previous generations could barely imagine, yet many still feel financially squeezed. Smartphones are more powerful, information is almost free and countless products have become more accessible. But owning a home, raising children, building savings, and achieving long-term financial security can feel increasingly difficult.

The problem may not be that society has stopped getting richer. It may be that income, consumption, and economic security are no longer moving together. A household can earn more and consume more while still feeling poorer if an increasing share of its income goes toward rent, mortgages, childcare, insurance, debt, and other recurring obligations.

Cost of Living and Wealth Are Being Pulled Apart by Housing

Modern economies have become exceptionally good at producing consumer goods cheaply. Electronics have become more powerful while prices have fallen. Communication has become almost costless, while streaming, software, digital banking, and online services have transformed everyday life.

Housing has behaved differently.

Across the European Union, house prices increased by 53% between 2010 and 2024. EU households spent an average of 19% of disposable income on housing in 2024, while households earning below 60% of their national median income devoted roughly 37% to housing.

That creates a peculiar economic situation. A television can become cheaper while the apartment in which it sits becomes dramatically more expensive. A smartphone can provide computing power that would have been unimaginable decades ago, while the deposit required to buy a home can take years to accumulate.

This helps explain why GDP growth alone cannot fully capture how households experience the economy. GDP can rise as businesses produce more goods and services and incomes increase, but that does not automatically mean households are accumulating the assets required for long-term stability.

The difference becomes particularly visible between generations.

A parent who bought a home at 30 may have spent decades converting income into an appreciating asset. Their child might earn considerably more at the same age but remain a renter into their thirties or forties.

The two generations can therefore have very different wealth trajectories despite the younger generation having higher salaries and dramatically greater access to technology.

Ownership changes the equation.

Rent is an expense. A mortgage is also expensive, but it can simultaneously build equity. When housing prices rise, the owner participates in that appreciation while the renter continues paying for access to the same asset.

Housing is therefore increasingly becoming a question of intergenerational wealth rather than simply shelter.

Cost of Living and Wealth Are Being Reshaped by Recurring Costs

Housing is only part of the problem. The modern household has gradually moved from an ownership economy toward an access economy.

Previous generations bought music collections, films, software, and physical products. Today’s consumers increasingly subscribe to them. Streaming services, cloud storage, software subscriptions, premium memberships, leased vehicles and instalment-based purchases can each appear affordable individually. Together, however, they create a permanent layer of household expenditure.

The result is a subtle shift in what it means to be financially comfortable.

A household can have access to more services than any previous generation while owning fewer economically meaningful assets. Recurring expenditure also reduces flexibility because households with high fixed monthly costs have less room to respond when income falls, prices rise or unexpected expenses appear.

Labour markets present another part of the puzzle. OECD data show employment rates reaching historically high levels in early 2026, yet real wages had still not recovered to their early-2021 levels in roughly one-third of OECD economies examined.

More people can therefore be employed while many workers still feel financially pressured.

There is no contradiction.

Employment measures whether people have jobs. Economic security asks whether those jobs provide enough purchasing power, savings capacity and stability to build a future.

People do not experience GDP directly.

They experience rent, grocery bills, school fees, childcare, insurance, loan repayments, and transport costs. They experience how much money remains after those expenses have been paid.

This is why economic statistics and public sentiment can appear to disagree.

The deeper issue is that conventional measures of prosperity emphasize income and consumption while households care about something broader: income, assets, security, time, and freedom from unavoidable expenditure.

Previous generations did not necessarily have better lives. They had inferior technology, fewer consumer choices and, in many cases, lower incomes. But some households may have enjoyed a clearer path from employment to ownership.

A job could lead to a mortgage. A mortgage could lead to a home. A home could provide collateral and wealth. Savings could eventually become financial independence.

That sequence has become harder for many younger households to achieve.

The central paradox of modern prosperity is therefore not that people have stopped becoming richer. It is that we have become exceptionally good at making consumption affordable while struggling to make economic security affordable.

That may be why someone can earn more, consume more and own more technology than their parents did — yet still feel poorer.

The real measure of prosperity may ultimately be less about how much we can access and more about how much of our future we actually own.