We Are Richer Than Our Parents. So Why Do We Feel Poorer?

There is something economists should probably explain better.

By almost every conventional measure, citizens of developed economies are richer than their parents were.

Our homes contain technology that a billionaire could not have bought in 1985. A smartphone combines a telephone, television, camera, map, library, bank branch, travel agency, newspaper, music collection and computing power that once required an entire room.

Air travel is accessible to millions. Medicine has improved dramatically. Cars are safer. Information is almost free. Entertainment is unlimited.

And yet ask a 30-year-old in Milan, Madrid, London, New York or Toronto whether he feels economically privileged compared with his parents at the same age.

The answer may contain language unsuitable for an economics textbook.

This is one of the most interesting economic paradoxes of our time:

we have become extraordinarily rich in products and surprisingly poor in economic certainty.

Perhaps the problem is not that living standards have stopped improving.

Perhaps we have confused two very different concepts:

the ability to consume more things and the ability to afford a life.

Those are not the same thing.

The €1,000 television and the €500,000 apartment

The modern economy has been extraordinarily good at making manufactured goods cheaper, better and more accessible.

Televisions became larger and cheaper.

Computers became exponentially more powerful.

International communication became virtually free.

Clothing became cheaper.

Consumer electronics became almost disposable.

But consider the things that define adult economic security rather than consumer entertainment:

housing;

education;

childcare;

healthcare in several countries;

eldercare;

insurance;

and, increasingly, retirement security.

These goods behave rather differently.

In the European Union, house prices increased by 53% between 2010 and 2024. EU households were spending an average 19% of disposable income on housing in 2024, with much higher proportions among poorer households. (European Commission⁠)

For households earning below 60% of their national median income, housing absorbed around 37% of disposable income.

That is an astonishing distinction.

The economy has made the screen on which you watch Netflix cheaper.

It has not performed the same miracle with the room in which you watch it.

And GDP counts both.

GDP is not lying. We may simply be asking it the wrong question.

There is a temptation in political debate to dismiss GDP whenever people say that they are struggling.

That is intellectually lazy.

GDP measures something important.

But it does not claim to measure everything that people imagine it measures.

If GDP per capita rises because technology, financial services, healthcare expenditure and corporate output rise, society may genuinely be producing more value.

That does not automatically mean that the median household can more easily purchase the assets that determine long-term security.

An economy can simultaneously become richer while the entry price into middle-class stability becomes more expensive.

There is no contradiction.

Imagine an economy in which your laptop costs half as much, your entertainment subscription costs $15 a month, your food can arrive at your door in 20 minutes — but the deposit on an apartment requires eight years of savings.

The consumer is richer.

The citizen may not feel richer at all.

The quiet difference between income and wealth

This distinction becomes even more important when comparing generations.

A young professional earning a respectable salary today may appear richer than his father was at the same age.

But the father may have bought an apartment at 30.

The son may be paying rent at 35.

The father accumulated an appreciating asset while servicing a mortgage.

The son may transfer a substantial portion of his salary every month to someone who already owns that asset.

Income comparisons alone therefore miss part of the story.

Ownership changes the trajectory of wealth.

Two people can have the same monthly disposable income while living radically different economic lives if one owns the house and the other rents it.

This is why the housing crisis is not merely a question of property.

It is increasingly a question of intergenerational capital formation.

Employment statistics can tell another reassuring story

Here is another paradox.

Labour markets across much of the developed world have been remarkably resilient.

OECD employment reached record levels, with employment rates at historically high levels in early 2026. Unemployment remained close to historic lows. (OECD⁠)

Excellent.

Except that real wages still had not regained their early-2021 level in roughly one-third of the OECD countries analysed by Q1 2026. Italy was among the countries where real wages remained more than 2% below that benchmark. (OECD⁠)

This produces one of the strangest sentences in contemporary economics:

more people can be working while many workers still feel poorer.

Both statements can be true.

And both are true often enough that politicians should stop treating one as proof that the other cannot exist.

America offers the same warning

The Federal Reserve’s Survey of Household Economics and Decisionmaking provides an interesting American example.

In 2024, 73% of U.S. adults said they were doing okay or living comfortably financially.

That sounds quite positive.

But the same figure had been 78% in 2021, and inflation and prices remained respondents’ leading financial concern. Most adults reported taking some action to adjust their spending in response to higher prices. (Federal Reserve⁠)

Housing remained the largest expense for most families, while renters most frequently said that financial constraints were the reason they rented instead of owned. (Federal Reserve⁠)

Again, the point is not that Americans are secretly impoverished.

They are not.

The point is more subtle:

economic progress and economic comfort are not synonyms.

And then we added subscriptions

There is another transformation that conventional comparisons barely capture.

Our parents bought things.

Increasingly, we buy access to things.

Software.

Music.

Movies.

Cloud storage.

Phones through instalments.

Cars through leasing.

Apps.

News.

Premium memberships.

Delivery services.

Insurance products.

Streaming television.

Perhaps soon features already physically installed inside cars.

None of these individual payments looks catastrophic.

That is precisely why the model works so beautifully.

The modern household can be financially drained by expenses that individually look trivial.

The old middle class accumulated objects.

The new middle class increasingly accumulates monthly obligations.

This creates another curious phenomenon:

we can possess access to more services than any previous generation while owning comparatively fewer economically meaningful assets.

Your grandparents might have found Spotify miraculous.

They might have been less impressed that at 36 you still cannot afford the apartment.

Children have become an economic project

Then comes family formation.

Fertility is falling across much of the developed world, and discussion tends to become ideological remarkably quickly.

People blame feminism, selfishness, careerism, cultural decline, dating apps or younger generations allegedly preferring dogs to babies.

Economics offers a less theatrical explanation.

The OECD finds that financial security, labour-market conditions, childcare and particularly housing costs influence decisions about having children. Its analysis identifies a clear negative association between higher housing costs and fertility. (OECD⁠)

In the European Union, fertility fell to 1.34 children per woman in 2024, the lowest figure in the EU series beginning in 2001.

Women were having their first child at an average age of 29.9, compared with 28.9 only a decade earlier. Italy reached 31.9 and Spain 31.5. (European Commission⁠)

Perhaps young Europeans have suddenly discovered an ideological objection to reproduction.

Or perhaps buying enough square metres for another human being has become rather expensive.

Occam’s razor remains useful even in demography.

The prosperity illusion

This brings us to what I would call the prosperity illusion.

It is not the illusion that society has become richer.

It has.

It is the assumption that aggregate prosperity automatically produces personal security.

It does not.

A society can experience technological abundance and housing scarcity simultaneously.

It can enjoy record employment and disappointing real wages.

It can produce extraordinarily cheap entertainment while making parenthood expensive.

It can give a young person more computing power than NASA once possessed while asking that person to obtain parental assistance for the deposit on a one-bedroom apartment.

All of those things can exist in the same economy.

And increasingly they do.

We may need another definition of wealth

Perhaps the household version of wealth should be thought of differently.

Not merely:

Income + Consumption.

But:

Income + Assets + Security + Time + Freedom from obligatory expenditure.

This would explain why two people with identical salaries can perceive themselves very differently.

One owns a home, has manageable debt, family support and savings.

The other rents, carries debt, faces expensive childcare and has little protection against losing his income.

Statistically they may look surprisingly similar.

Psychologically and politically they live in different countries.

Why this matters politically

This is not only an economic curiosity.

It helps explain modern politics.

When governments tell voters that unemployment is low and GDP is growing, they may be entirely correct.

When voters reply that life feels unaffordable, they may also be entirely correct.

The problem begins when each side assumes that the other must therefore be lying.

People do not experience GDP.

They experience the rent.

They do not purchase annual productivity statistics.

They purchase groceries.

They do not live inside the unemployment rate.

They live inside an apartment that may now cost 40% of their income.

This is where economic statistics meet political anger.

Ignoring that connection creates a magnificent opportunity for populists, because populists are usually very good at identifying pain even when they are much less talented at curing it.

The uncomfortable conclusion

Our parents did not necessarily live better.

They lived with worse medicine, worse technology, fewer choices, less convenience and in many cases much lower incomes.

Nostalgia is a terrible statistical methodology.

But there is one area in which parts of previous generations enjoyed a genuine advantage:

the path from employment to economic adulthood was often shorter.

A job could more plausibly lead to a house.

A house could lead to family formation.

Savings could build assets.

That sequence has weakened.

The modern economy has compensated us with extraordinary consumption possibilities.

But people eventually discover that a thousand digital conveniences do not equal one economic foundation.

And that may be the real paradox of modern prosperity:

we have never had access to so much, while so many people fear they can afford so little of what actually determines the shape of a life.

Perhaps the greatest economic illusion of our time is confusing access to more things with the ability to afford a life.

Roberto Balbino
Founder & CEO, Fintech SCB
Independent analyst of finance, economics, geopolitics and global markets
www.fintechscb.com

Principal data sources: OECD Employment Outlook 2026; OECD Society at a Glance 2024; OECD fertility analysis; Eurostat, Housing in Europe 2025 and Demography of Europe 2026; Federal Reserve, Survey of Household Economics and Decisionmaking 2024.