What is Economic Wellbeing?

This study note looks at the concept of economic wellbeing.

What is economic wellbeing and how might it be measured?

Economic well-being refers to the overall standard of living and quality of life of individuals and households within an economy. It encompasses various dimensions, including income, wealth, employment opportunities, access to basic goods and services, social support, and overall satisfaction with life.

Measuring economic well-being involves a combination of objective and subjective indicators. Here are some commonly used measures:

Gross Domestic Product (GDP): GDP is a widely used indicator to measure the overall economic activity within a country. It represents the total value of goods and services produced within a specific time period. While GDP provides a measure of economic output, it does not capture the distribution of income or well-being of individuals.
Income and Wealth Distribution: Examining the distribution of income and wealth provides insights into the degree of inequality within a society. Indicators such as the Gini coefficient, which measures income inequality, and wealth distribution metrics help assess the extent to which economic resources are distributed among different segments of the population.

Poverty and Basic Needs: Measuring poverty rates and access to basic needs, such as food, clean water, housing, and healthcare, is important for assessing economic well-being. Indicators like the poverty line, the percentage of people living below the poverty line, and the Human Development Index (HDI) take into account factors beyond income to gauge the overall standard of living.

Employment and Labor Market Indicators: Employment rates, unemployment rates, and labor force participation rates provide insights into the availability of job opportunities and the overall health of the labor market. Evaluating the quality of employment, including wages, working conditions, and job security, helps assess economic well-being at the individual level.

Social Indicators: Social indicators encompass factors such as education, healthcare, social support, and access to essential services. Measures like literacy rates, school enrollment rates, life expectancy, access to healthcare facilities, and social assistance programs provide a broader understanding of economic well-being by considering non-economic aspects of people's lives.

Subjective Well-being: Subjective indicators capture individuals' own perceptions and evaluations of their well-being. Surveys and questionnaires that assess life satisfaction, happiness, and overall subjective well-being provide valuable insights into the personal experiences and perceptions of individuals.

It is important to consider a combination of these measures to get a more comprehensive understanding of economic well-being. No single indicator can fully capture the complexity and multidimensionality of individuals' economic well-being, and using multiple measures provides a more nuanced picture.