measuring the standard of living

The benchmark for measuring the standard of living in a country is to use real national income per capita. This is found that dividing real national income (GDP or GNP) by the total population.

The chart below shows data on per capita gross domestic product for the UK since 1970. The data is expressed in dollars.

To make a cross-country comparison of living standards, we need to express the data in a common currency (nearly always the US dollar). In the chart above we see a fall in per capita GDP in 1993. This was not because the British economy was in recession - indeed the economy enjoyed a recovery in output and incomes in this year. The reason for the dip in per capita income (measured in US dollars) was that the pound fell sharply against most other currencies (following our departure from the exchange rate mechanism). This reduced the value of UK national output when measured in another currency.

The strong pound since 1996 has had the opposite effect - boosting the UK's position in the international living standard league.

Differences in living costs between countries

Adjustments can also be made for variations in price levels and the average cost of living between countries by expressing the figures using estimates for purchasing power parity. However fluctuations in the exchange rate can affect the accuracy of the figures. And, there is no guarantee that each country measures national output and incomes with the same degree of accuracy.

Alternative indicators when measuring living standards

To come to a general judgment on living standards within an economy we can use a range of alternative indicators

These could include:

Ownership of consumer durables such as televisions, dish washers, home computers

Estimates of pollution levels (see the revision notes on externalities)

Measures of social welfare (see below) Home ownership levels and other indicators of household wealth

SOCIAL WELFARE STATISTICS TO MEASURE THE QUALITY OF LIFE

the number of patients per doctor - a measure of health provision in a country
hospital waiting lists for important operations
the number of children per thousand of the population who die each year (infant mortality rates)
the average food intake per person (measured by average calorific intake)
the proportion of the population that can read or write - literacy rates
average educational attainment at different age levels
crime rates
divorce rates

These statistics should indicate what proportion of the population is enjoying a minimum standard of living although perceptions of what is needed for a basic quality of life vary widely.

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