A paradox plagues modern life in much of the West: luxury is supposedly attainable by all, but the cost of living has skyrocketed. New flat-screen TVs are readily available and cost a fraction of what they did 20 years ago. Meanwhile, sophisticated 4G mobile phones can be bought for just $50. International travel has become so cheap that a story of two friends from the UK meeting up in Malaga because it was more affordable than a train from Birmingham to Newcastle does not seem all that surprising.
At the same time, absolute necessities such as affordable accommodation, nutritious food and basic health care are being pulled further out of the reach of millions. It can cost more to fill a fridge with locally produced organic fruit and veg than to buy the appliance itself. Boomer parents scolding their millennial children for not being able to afford a house because they were spending too much on avocados is unjust – the house was never going to be affordable anyway.
Globally, food and energy bills remain high. The International Monetary Fund has said average global inflation was 6.7 per cent in 2023, falling to 5.8 per cent last year. So why has it become so easy to enjoy the finer things in life, but so expensive to simply live?
Mass production, automation and global supply chain efficiencies have made once-expensive items such as electronics and furniture much cheaper. Airlines offer no-frills flights to secondary airports (think flying into Luton instead of Heathrow) with stripped-back offerings onboard, meaning a return fare within Europe can cost the same as a large pizza.
But at the same time, housing shortages push the price of property so high that some people's homes have appreciated by more than their owners have earned. Healthcare monopolies and policy changes have made the cost of basic medicines increase to a point where, according to a US poll released last year, approximately 25 per cent of Americans find it difficult to afford prescription drugs owing to high out-of-pocket costs.
In addition, the economic effect of supply chain disruptions (caused by, for example, the war in Ukraine) has caused energy bills to rise sharply, and food staples in supermarkets are tagged with security markers to prevent shoplifting. Jokes about buying eggs on the black market are now familiar social-media content.
This apparent contradiction was highlighted by Arthur Miller's Death of a Salesman in 1949. Its protagonist, Willy Loman, is a mediocre salesman who begrudges the multiple payments required to pay off his refrigerator. Nevertheless, he actually owns his home. Today, that fridge could be a one-time online purchase, but the house it will occupy may require two full-time salaries for the deposit alone.
Wage stagnation is a key factor that affects people's inability to afford the basics, and it has been a problem for some time. A 2015 study by the Economic Policy Institute has already shown that in the US "the stakes of rising inequality for the broad American middle class are enormous" – and that was before the Covid-19 pandemic.
From 1973 to 2013, the Institute says, a typical American worker’s hourly compensation rose just 9 per cent while productivity increased 74 per cent, meaning workers were producing far more than they were being paid for. In contrast, over the 30 years that followed the Second World War, most workers’ hourly compensation rose 91 per cent, more or less matching the 97 per cent productivity growth.
During the Covid-19 pandemic, government stimulus cheques and supply chain disruption meant prices were inflated; the switching on of the money-printing machine meant that hard-earned savings were being devalued with its every whirr. Even where wages nominally increased, purchasing power had been so affected that it barely made a difference.
The solution includes investment in wage growth, affordable housing and an increase in public services, all things that need to be addressed to help in a world weighted against young people in particular. Some individual initiatives are making headlines: in Spain, a 100 per cent tax on foreign property buyers to tackle the country's housing crisis has been proposed, meaning anyone outside the EU could be paying double the list price for their house in the sun.
Australia's ruling Labour Party is also promising to ban foreign investors from purchasing existing homes for at least two years, whereas in Canada and New Zealand, an actual ban on foreign property ownership is already in place. Canada's ban was supposed to end on January 1 but will continue for another two years. New Zealand's ban has been in effect since 2018.
In the UK, universal credit, housing benefits and the winter fuel allowance are vital to support struggling people. In 2022, the Conservative government gave millions of people a £350 ($452) payment to handle rising energy bills. Plans by the current Labour Party government include scrutinising companies that refuse to train British workers and potentially blocking these businesses from sponsoring visas for foreign employees.
In some cases, this situation is inspiring positive changes in attitude and behaviour. Tech lovers are trading in their old devices in exchange for cash to pay for a new one, or looking to the refurbished mobile phone market for the newest models.
Initiatives surrounding the reduction of food waste and minimisation of electricity usage are a much-needed boost for the planet. In some French and Belgian towns, local municipalities give away chickens to thousands of residents, significantly reducing food waste and reducing the cost of the weekly shop owing to the fresh supply of eggs.
Ultimately, education is key. It is said that the rich buy assets while the poor buy liabilities; taking into account that the rich generally have more disposable income with which to buy assets, general knowledge about savings and investments would benefit those on lower incomes, helping them to achieve more comfort and security later in life. Financial literacy is one of the best lessons anyone can learn.
Without a change of direction, we are headed for a top-heavy lifestyle in which luxury is abundant but a healthy and stable existence is out of reach. For now, we continue to live in the irony that hopping on a plane and escaping life's problems is cheaper than living life itself.
