Mainstream measurement criterias of Standard of Living and their imperfections
International organizations like IMF, UNDP, World Bank use different mainstream method to evaluate the standard of living of various countries. While no method is completely free of flaws but surely one method can be seen as better than another if we compare.
GDP measures the monetary value of final goods and services — that is, those that are bought by the final user — produced in a country in a given period of time . It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. GDP in a country is usually calculated by the national statistical agency, which compiles the information from a large number of sources. In making the calculations, however, most countries follow established international standards. The quality of life may also depend on the distribution of GDP among the residents of a country, not just the overall level. To try to account for such factors, the United Nations computes a Human Development Index, which ranks countries not only based on GDP per capita, but on other factors, such as life expectancy, literacy, and school enrollment. GDP by definition is an aggregate measure that includes the value of goods and services produced in an economy over a certain period of time. There is no scope for the positive or negative effects created in the process of production and development. Economic growth has raised living standards around the world. However, modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation’s economy and doesn’t reflect a nation’s welfare. Environmental degradation is a significant externality that the measure of GDP has failed to reflect. The production of more goods adds to an economy’s GDP irrespective of the environmental damage suffered because of it. GDP also fails to capture the distribution of income across society — something that is becoming more pertinent in today’s world with rising inequality levels in the developed and developing world alike.
Environmental indicators in their indices comprise four main areas. They include population, total damage inflicted on the environment, damage caused in the area of the environment, and the effects of such damage on quality of human life. Any such economic factors are less important and apply only to the consumption or the influence of export or import on the environment. Quality of life is expressed here as the influence of the environment. Examples might include access to safe drinking water, water quality, the impact of air pollution on human health, the impact of environmental damage on the rise and spread of diseases, the use of pesticides in agriculture, and more. The environmental Performance Index evaluates countries based on their ability to achieve environmental objectives, so it is a kind of competitiveness in the field of the environment. The EPI consists of two parts, namely environmental health and ecosystem vitality. A greater degree of correlation was achieved in environmental health. This is more connected to the country’s economy than to the ecosystem vitality. Government efficiency is also very closely related to the EPI. Low bureaucracy, the creating of strategies for sustainability, and even low corruption, contribute to the better functioning of the economic system and thus to fulfilling targets.
The Human Development Index (HDI) and SSI. When comparing indicators dealing with living standards from the perspective of society, we can observe four main dimensions which are also the contents of these indicators. They include a long and healthy life, education, economic level, and a personal dimension. Economic factors are less important. They include GDP or the material assets of a household, such as housing standard, income, salary, and so on. Although the Human Development Index does not include economic fundamentals, it has a strong relationship with GDP. The Human Development Index is criticized for the lack of any variable referring to the environment.
Gross National Happiness measures the quality of a country in more holistic way [than GNP] and believes that the beneficial development of human society takes place when material and spiritual development occur side by side to complement and reinforce each other.
The GNH Index includes nine domains namely Psychological wellbeing, health ,education, time use, cultural diversity and resilience , good governance, community vitality, ecological diversity and resilience and living standards. It identified four groups of people — unhappy, narrowly happy, extensively happy, and deeply happy. The analysis explores the happiness people enjoy already, then focuses on how policies can increase happiness and sufficiency among the unhappy and narrowly happy people. Taking a cue from Bhutan , western world took up the concept of Happiness Index from 2013 onwards in the form of an annual report. From 2013 until today, every time the World Happiness Report (WHR) has published its annual ranking of countries, the five Nordic countries — Finland, Denmark, Norway, Sweden, and Iceland — have all been in the top ten, with Nordic countries occupying the top three spots in 2017, 2018, and 2019. These results suggest that COVID-19 has reduced the effect of income on life satisfaction, increased the benefits of having someone to count on in times of trouble, and increased the negative effects of having a health problem or being unemployed. The biggest change is the increase, averaging 0.132 points, in the life satisfaction of those 60 years and older relative to the younger age groups. The analysis has two parts: first, the wellbeing of the people who have been identified as ‘happy’ is examined to show the indicators in which they enjoy sufficiency. Some individual examples are presented to show that the ‘happiest’ people are diverse with respect to age, district, occupation, gender, and sufficiency profiles. Second, the insufficiencies among those not identified as happy (or not-yet happy) are examined. The GNH Index value can rise either by increasing the percentage of people who are happy, or the percentage in which not yet-happy people enjoy sufficiency. This analysis clarifies areas where policy interventions or actions by other institutions could increase GNH.
On the whole, the factors that affect standard of living and which should be included in the indicators are population size and density, expenditure on health and education and the emission of carbon dioxide into the atmosphere. Population size reduces living standards and leads to a greater burden on the environment and also reduces sustainability. Population density influences and determines civic amenities. In more densely populated areas, all necessary services are more accessible. Such amenities include medical facilities, educational institutions, infrastructure, shopping centers, as well as areas for entertainment and leisure.
REFERENCES –
Pacek, A. C., & Radcliff, B. (2008). Welfare policy and subjective well-being across nations: An individual-level assessment. Social Indicators Research, 89(1), 179–191.
OECD. (2013). OECD Guidelines on Measuring Subjective Well-being. Paris: OECD Publishing
Inglehart, R., Foa, R., Peterson, C., & Welzel, C. (2008). Development, freedom, and rising happiness: A global perspective (1981–2007). Perspectives on Psychological Science, 3(4), 264–285.
https://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm
https://hbr.org/2019/10/gdp-is-not-a-measure-of-human-well-being
https://hdr.undp.org/en/hdi-what-it-is
https://www.econstor.eu/bitstream/10419/184498/1/danb-2015-0011.pdf
