Question

How do we measure and compare living standard?

Explain why real GDP per capita isn't a perfect measure of living standard

Share your thought on how to measure and compare living standard and quality of life

Answer 1

Level of living is a measure of an economy's material aspects. It counts the amount of goods and services that a person, family, group, or nation produces and has available for purchase. The living standard varies from the quality of life. It does not measure non-material features like relationships, equality, and satisfaction. These are part of the standard of living. Indications which attempt to measure quality of life also include the standard of living measurement of the material.

GDP per capita is the generally accepted indicator of living standards. This is the gross domestic product of a country which is divided by its population. The GDP is the total output of goods and services that everybody within the borders of the country produces in a year. Real GDP per capita does away with inflationary effects or price increases. Real GDP is better than nominal GDP, a measure of living standards. A country that produces a lot can make higher wages payable. That means that its residents can afford to buy more of its abundant output.

The per capita GDP has three shortcomings. Firstly, unpaid work doesn't count. It covers critical components such as in-home child care or elder care, volunteer work, and housework. Unless there were such support programs, several activities that are included in GDP would not have been feasible. Second, it does not measure environmental pollution, safety and health. The government can encourage an industry that is spewing up chemicals as part of its production process. The elected officials see only job creation. Only decades later may the cost come to roost.

Third, calculation of GDP per capita assumes output and its benefits are divided equally among all. It does not take account of income inequality. It can report to a country where only a few enjoy a high standard of living.