Eurasia Press & News
The decline in trust in political institutions and its rise in trust toward populist politicians in recent years may have economic causes, among other things: global economic growth no longer automatically translates into middle-class prosperity. For millennials and zoomers, social mobility hasn’t simply slowed—it’s stalled at the lower levels: in the US, the probability that a child will become wealthier than their parents has fallen from 90% (for those born in the 1940s) to 50% (for those born in the 1980s). On paper, incomes are rising, but inflation on key “tickets to the middle class”—housing and education—is several times faster than wage growth, making the standard of living of the previous generation unattainable. In Russia, this global trend has taken the form of “poor satiety.” While government price controls on the “borscht set” mitigate the threat of hunger and absolute poverty, the cost of vital assets—from real estate to healthcare and cars—is becoming prohibitively high.
The Great Divide: When the Economy Became Disconnected from People
In the history of economic thought, the period from the end of World War II to the mid-1970s is called the “Golden Age” or the “Great Compression.” During this time, the growth rates of labor productivity and real wages were inextricably linked: if a worker began producing more parts per hour through technology, their hourly wages increased almost proportionally.
However, by the late 1970s, a completely different era had begun. Today, thanks to Paul Krugman, it’s called the “Great Divide.” According to the Economic Policy Institute , from 1979 to 2022, labor productivity in developed economies grew by 64.7%, while hourly wages for ordinary workers increased by only 14.8%. This means that the economy became more efficient, but the excess profits went to owners and top management, not to those creating the product. Furthermore, the middle class stopped sharing in the growth of national wealth.
At the same time, most countries have succeeded in eliminating absolute poverty. This success has created an illusion of prosperity that obscures the real problems of the middle class. According to the World Bank, the global extreme poverty rate fell from 44% in 1980 to less than 10% in the 2020s. In developed countries, this figure is close to zero. While in the 1950s and 1960s, pockets of chronic malnutrition still existed in many regions of Europe and the United States, today state social protection instruments (such as food stamps in the United States or social assistance in the EU) provide a basic safety net.
The global extreme poverty rate has fallen from 44% in 1980 to less than 10% in the 2020s, with the figure close to zero in developed countries.
Today, the average person in a developed country consumes more calories and eats a more varied diet than wealthy people in 19th-century Europe (due to the availability of vitamins year-round), as shown by historical data from Our World in Data . And the main marker of poverty—the share of food expenditures in total consumption—has significantly decreased. In the mid-20th century, the average family spent over 50% of its budget on food. Today, according to OECD data , this figure is only 10–15% in developed countries. Russia lags behind in this indicator. According to Rosstat data , the share of food expenditures remains around 35% (even in the best of times, in 2010, it only dropped to 29.6%).
Moreover, items that were once luxury goods have become penny-pinching mass-market items. This is due to globalization and the relocation of manufacturing to countries with cheap labor (first China, now other Asian countries). The cost of household appliances, clothing, and furniture has plummeted. Today, a smartphone with computing power greater than that of NASA computers in the 1970s is within everyone’s reach.
All this creates a picture of “universal wealth”: a poor person can dress the same as a rich person and use the same social media interface. A person can also be “well-fed” but still be completely cut off from the mechanisms of social growth. The freed-up money was supposed to make people richer, but instead it was instantly absorbed by the swelling value of “development assets”—housing, healthcare, and education.
Politicians often cite rising nominal wages, which in the US have more than doubled since 1995. However, if these figures are adjusted for overall inflation, real income growth was approximately 50% in the US and only 34% in France. The problem is that housing, education, and healthcare costs have risen faster.
While 90% of children born in the US in the 1940s earned more than their parents did at age 30, only 50% of Americans born in the mid-1980s achieved the same . Yet, the increased wealth of offspring compared to the previous generation is one of the components of the “American Dream.” When looking at men’s incomes separately, the picture is even more depressing: by age 30, 95% of boys born in 1940 earned more than their fathers, compared to only 41% of those born in 1984.
As a result, American adults are dissatisfied with their financial situation. Around 75–80% of them believe that today’s children will have a harder time achieving financial success than their parents. After all, the cost of homeownership relative to income has nearly doubled compared to even the not-so-distant 1990s. People see their parents owning homes and having stable families by their 30s—all on a single income. Meanwhile, at the same age, they are still paying off student debt and sharing rent.
Currently, more than a quarter (28%) of Europeans consider their financial situation unstable. This means they’re currently coping, but if unexpected expenses arise, their balance will be inconsistent. Fifty-six percent said they’re doing well for now, but need to be careful with their spending.
28% of Europeans say they can manage for now, but if unexpected expenses arise, their balance will be incomplete.
Overall, the situation in Europe appears softer than in the US, but only at first glance. From 1995 to 2019, labor productivity in the eurozone grew by 28%, while in the US it grew by 50% over the same period. Meanwhile, European professionals today operate in a less dynamic environment, where their real purchasing power has stagnated for decades.
In the UK, 56% of citizens born before 1975 had higher incomes than the previous generation, but among younger Britons, this share has fallen to 33%. Sweden is an exception, where 84% of men and 86% of women earn more than their parents. This is one of the highest rates in the region and is explained by the country’s inherently low levels of inequality.
Russia’s “Great Divide” has been delayed. In the 2000s, wages grew on average amid high oil prices, outpacing productivity growth. During the full-scale invasion, a “wage race” ensued due to a labor shortage, but again, this wasn’t matched by greater efficiency. It might seem that the Russian middle class has the opportunity to become rich and realize the “American Dream.” However, this opportunity is limited to a small number of residents in large cities; for the rest of the population, income increases are very modest.
The illusion of growth
Let’s consider how living standards have changed using the United States, France, and Germany as examples. These countries are, on the one hand, the largest and most developed Western economies, but on the other, they represent different types of economies. The United States is a distinctly liberal economy with high labor mobility, minimal restrictions (including in the social sphere), and weak state involvement. It primarily monitors compliance with the “rules of the game.” France is a social democratic system with high restrictions for employers, a progressive tax scale (the rich pay more), a developed social assistance system, and extensive state intervention in the market. Germany occupies an intermediate position, although closer to the French model.
To understand whether broad swathes of the population are truly becoming poorer, let’s look at the dynamics of nominal and real wages (that is, adjusted for inflation), and also calculate the average wage in each country needed to buy one square meter of housing, a Toyota Corolla (as a mid-range car), and the cost of dental services (say, a filling). These calculations are, of course, very approximate, but they provide a general picture.
Over the past 30 years, nominal wages have grown in all three countries. The average annual wage in the United States was approximately $35,000 in 1995, and in 2023 it was over $81,000 (an increase of approximately 130%). In France, over the same period, the average nominal wage increased from €25,000 to €43,500 per year (a 57% increase). In Germany, it increased from €42,000 to €48,300 (an increase of approximately 15%). In terms of real wage growth, the United States also led the way: over the past 30 years, wages there have grown by 10-15%, while in Germany and France, they have grown by 5-10%.
In other words, real wages are growing, albeit slowly, and median wages are also growing.
This would seem to mean that people should generally become richer. But paradoxically, goods, many basic services, and housing have become, on average, less affordable in all three countries over the past 20 years. Even in the United States, where wage growth has been particularly noticeable, the average salary spent on a car now exceeds the average salary 20 years ago.
Housing affordability has fallen particularly dramatically (by a third). And this is an average decline—residents of large cities have felt the impact much more acutely. Overall, real estate in the EU has increased in price by 50% over the past 15 years (2010–2025), while rental prices have risen by 25%, increasing the price-to-income ratio by 20–30%. In the US, the house price index has risen by 100–150% since 1995, reaching four to six monthly salaries per square meter (versus three in 1995). In the EU, housing inflation peaked (23.3%) in 2022. This has led to an affordability crisis: one in ten Europeans spends more than 40% of their income on housing.
Services are more difficult to measure because trends can vary greatly across categories, but dentistry, one of the most universal medical services, has also become less accessible.
This trend is bound to impact public sentiment. While Elon Musk prepares to become the first trillionaire in history, the average family understands that paying off their mortgage will take them their entire lives. The recent wave of inflation, a consequence of the coronavirus and rising energy prices amid the war in Ukraine, has made this problem particularly acute.
Russian stagnation
Russia fits poorly into the general trend, as it was unique in every way: first, it was a command economy, then an emerging unstable market, then an oil superpower, and then a highly regulated military economy. Any comparisons with global trends here are, of course, very conditional.
Real wages for Russians increased alongside rising oil prices in the early 2000s, but after the 2008 crisis, growth slowed. After the annexation of Crimea and the initial sanctions, they first stalled, then recovered slightly, and then plummeted again due to the full-scale invasion. When converted to dollar terms, Russian wages rose even faster and fell even more dramatically.
Paradoxically, Russians are characterized by a belief that things aren’t so bad for them (and official statistics claim that real wages continued to grow in 2025 ), while at the same time holding extremely negative expectations for the future. Perhaps this is due to repeated experience: historically, rising prosperity in Russia has invariably been followed by a sharp decline. Meanwhile, in terms of living standards, the last 20 years have been remarkably stable.
Looking at the affordability of specific goods and services, the lives of Russian citizens improved significantly in the early 2000s, of course, compared to those in Western countries. This isn’t just due to oil prices, but also to the low base effect: purely arithmetically (and psychologically), growth from near-zero levels appears much more significant than from already high levels. But since the late 2000s, this growth has been fading. For Russia, let’s take the Toyota Camry as an example to see how the affordability of middle-class cars has changed for Russians. If in 2005, it took 150 average salaries to buy such a car, by 2010 it was only 38. Since then, the price has fluctuated around this figure and only in the last couple of years has it sharply increased again: today, this model is almost half as affordable as it was before the full-scale invasion.
Housing followed a similar dynamic: real estate prices, while seemingly fluctuating wildly, actually largely reflected wage levels, so in terms of affordability for Russians, little changed over the long term. In 2005, a square meter in Moscow cost 11 monthly wages, after which affordability declined for several years and returned to this level in the early 2010s, remaining at this level until the outbreak of full-scale war (and even declining slightly).
However, the price per square meter factor doesn’t fully reflect affordability, as it doesn’t assess, for example, mortgage affordability. However, if we look at actual housing affordability through the number of transactions per capita, we see that this index reached its historical peak in 2020, before the full-scale war and the availability of preferential mortgages. However, with the end of the war and the rise in market rates, the index plummeted to the level seen twenty years ago. This effectively means that the rate of home purchases in the country has reverted to the 2006–2008 era, when the market was just emerging. Despite record construction, the real opportunity for people to enter into a transaction has halved.
The same applies to food accessibility. Over these years, Russian household spending on food has hovered around 35%, which, according to UN standards, is considered a sign of a country that is no longer poor, but not yet prosperous. The cost of the minimum food basket, as estimated by Rosstat, has fluctuated, but only slightly. At the same time, from 2005 to 2024, it generally became more accessible, despite price spikes for various products. This is an important difference between Russians and those in Western countries: while still living in a poor country, Russians spend the majority of their income on food, so the relative reduction in its price has allowed a significant portion of the country to switch to higher-quality and more expensive foods. At the same time, due to historical memories of malnutrition during the Soviet era, Russians place much greater importance on food accessibility than citizens of Western countries.
Comparing Russia with the US, France, and Germany is inaccurate, so let’s add China, Brazil, and Poland to the statistics. Russia is ahead of only Brazil in terms of wages (in Russia, the average gross salary is close to 100,000 rubles, or $1,300, compared to $600 in Brazil), which also has the advantage of lower inflation (4.6% compared to 5.6% in Russia). In terms of car affordability, Russia is a clear underdog (needing about 50 average monthly salaries), and in terms of nominal housing affordability, it’s more affordable for Russians (4 monthly salaries per square meter) than the US (10 monthly salaries), but less affordable than for residents of Poland (3.5) and Brazil (2).
Equally contradictory are the indicators for dental accessibility and the share of salary spent on the basic food basket. While in the first case, Russia (a filling costs $60) ranks between the United States ($100) and Germany ($80) on the one hand, and China, Brazil, and Poland ($50) on the other, the minimum amount of food in Russia can be purchased with the smallest share of salary. In all of the countries listed, the share of total food expenditures is much lower, and in the United States, it is significantly lower (6.7%).
Overall, it can be concluded that Russia is ahead of many countries in terms of basic needs, but lags significantly behind in the affordability of expensive goods (cars) and ranks in the middle in housing and dental care. It’s easy to see why: the government controls the price of the minimum food basket (the so-called “borscht basket”), leaving all other products to the market. Demand for housing is stimulated by mortgage subsidies.
In terms of meeting basic needs, Russia is ahead of many countries
Dentistry is directly dependent on market demand: price increases are constrained by the lack of government programs (like Medicare in the US) and the underdevelopment of corporate health insurance.
Russian authorities, it seems, still consider cars a luxury item rather than a means of transportation, so they use fees to address the problems of domestic automakers and the budget. And now, with the latest increase in the recycling fee starting November 1, we can expect a sharp decline in car affordability.
All this creates the image of a country where it’s “poor, but clean”: the authorities allow citizens to eat to their fill, partially satisfy the demand for housing (in the absence of a civilized rental market, including social housing), ignore the market for medical services not directly related to health protection and epidemiological safety, and fleece those who want to afford a higher quality of life (increased recycling fees on cars with an engine capacity of over 160 horsepower).
