Cheap does not mean affordable

 Disposable income, not the cost of living, is the metric that actually tells us whether life is affordable.

Cost of living, taken on its own, tells us nothing about whether people can actually afford to live. A country can have a relatively low cost of living and still leave households worse off, if wages are lower still. Affordability is not an absolute number — it is a ratio. What matters is how much people earn relative to what they must spend, not the sticker price of goods and services in isolation.

Disposable income — what remains after taxes and mandatory deductions — captures what households actually have in hand to spend, save, or invest. It is this figure, set against prices, that determines whether people are getting by or falling behind.

That said, disposable income alone is not the full picture either. Averages can mask real disparities in how income is distributed. Fixed costs like housing and energy eat up very different shares of income depending on where people live. For a genuinely accurate read, economists typically turn to real disposable income — income adjusted for local price levels — rather than treating cost of living or income as standalone indicators.