Irem Waseem's reasearch about measuring standard of living, Is it true that these measures are reliable, accurate and universal.

1. Iremwaseem
MSC, University of Sunderland, UK
MA , University of The Punjab , Pakistan
TOPIC: Standard of Living
Introduction
A level of material comforts as measured by the goods, services, and luxuries available to an
individual or group of a particular country. The term ‘standard of living’has in recent decades
increasingly approached the economists’ idea of a utility functions, in which well-being depends on a
wide variety of pecuniary and non- pecuniary circumstances. The history shows us the great
civilizations of ancient Rome and Egypt or of the Incas and theAztecs , we tend to compare them
with the empires of Britain or the growth of the United States. This comparison, judged in economic
terms, is highly misleading. It can be said that the great civilizations in Egypt and Rome were able to
build big buildings, the vast majority of their citizens, by today’s standards, were dirt poor. Even for
the poorer areas of this planet, the growth of the last fifty years has been quite remarkable.
Excluding the developed nations of Western Europe, North America, and Japan and focusing only on
the so-called Third World, we find that per capita economic growth, improvements in life
expectancy, and declines in mortality from disease and malnutrition outstripped the performance of
the most advanced nations of Europe, Britain, and France, during the Industrial Revolution of 1760–
1860 (Williamson 1993, p. 12). Indeed, the economic growth of South Korea, China, and Taiwan has
been so rapid since the 1960s that their people have seen material improvements in thirty or forty
years that took the British, French, and Germans a century or more to attain.
Measuring Standard of Life:
Income and Consumption
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

2. The most popular measures of living standards are income and consumption. Income refers to the
earnings from productive activities and current transfers. It can be seen as comprising claims on
goods and services by individuals or households whereas consumption refers to resources actually
consumed. Income can also be defined asthe amount of money that is received during a period of
time in exchange for labour or services, from the sale of goods or property, or as a profit from
financial investments.
The relationship between Income and Consumption shown below:
A big debate is still going on about which is the better measure of standards of living. For developing
countries, a strong case can be made for preferring consumption that is based on both conceptual
and practical considerations (Deaton and Grosh 2000).
National income is a measure of the total flow of earnings of the factor-owners through the
production of goods & services. In a simple way, it is the total amount of income earned by the
citizens of a nation. All incomes are based on production. In this sense, national income reflects the
level of aggregate output. According to estimates by economist N. F. R. Crafts, British income per
person (in 1970 U.S. dollars) rose from about $400 in 1760 to $430 in 1800, to $500 in 1830, and
then jumped to $800 in 1860. (For many centuries before the industrial revolution, in contrast,
periods of falling income offset periods of rising income.) Crafts’s estimates indicate slow growth
lasting from 1760 to 1830 followed by higher growth beginning sometime between 1830 and 1860.
For this doubling of real income per person between 1760 and 1860 not to have made the lowest-
income people better off, the share of income going to the lowest 65 per cent of the population
would have had to fall by half for them to be worse off after all that growth. It did not. In 1760, the
lowest 65 per cent received about 29 per cent of total income in Britain; in 1860, their share was
down only four percentage points to 25 per cent. So the lowest 65 per cent were substantially better
off, with an increase in average real income of more than 70 per cent. It is also said thatnineteenth-
century England was the birthplace of a consumer revolution that made more and more consumer
goods available to ordinary people with each passing year.It was happened only in industrial
revolution when the national income was remarkably increased.In United Kingdom no people live on
less than £4 a day. There were 619,000 net worth sterling millionaires in Britain in
2011.(http://www.telegraph.co.uk/finance/recession/8819427/Millionaires-number-of-wealthy-
Britons-rises-despite-recession.html).
Income distribution across UK regions
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

3. Office for National Statistic 2007 [2]
UK Region Gross Income
London £27,868
South East England £21,109
East Anglia £19,469
Scotland £19,282
North West England £19,236
West Midlands £18,801
South West England £18,629
Yorkshire & the Humber £18,614
East Midlands £18,321
Wales £17,651
North East England £17,594
Income distribution by job type
Median earnings between different job types in 2010 can be seen here. Source
http://www.statistics.gov.uk/pdfdir/ashe1210.pdf
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

4. Source:
http://www.statistics.gov.uk/pdfdir/ashe1210.pdf
Gross Domestic Product (GDP), Gross National Production
(GNP) and Gross National Income( GNI)
An estimated value of the total worth of a country’s production and services, calculated over the
course on one year is called GDP whereas GNP can be calculated by GDP (+) total capital gains from
overseas investment (-) income earned by foreign nationals domestically. GDP can be an excellent
way to measure a country’s standard of living and growth. It is important for there to be growth in
production in order to keep up increasing population. This is why a higher GDP helps to improve the
standard of living. . Unfortunately GDP does not capture all of a countries production because some
businesses may produce products in other nations. GNP is regardless of the location of where the
production process took place. GNP is founded upon ownership of a product not based upon
location. Just like GDP a higher GNP usually means a higher standard of living. It is an effective way
to measure a nation’s income and wealth.
GNI or gross national income combines the factor payments which are rent, wages, interest, and
profit and looks at the income of a country per capita. Per capita means per person of a population.
GNI is also an excellent way of judging a country’s standard of living, a higher GNI usually means a
higher standard of living. A downside to GNI is that doesn’t take into consideration the effects on the
environment such as pollution and crime rates.
Top 10 GDP countries according to IMF 2010 (millions of $)
1. United States (14,624,184)
2. China (5,745,133)
3. Japan (5,390,897)
4. Germany (3,305,898)
5. France (2,555,439)
6. United Kingdom (2,258,565)
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

5. 7. Italy (2,036,687)
8. Brazil (2,023,528)
9. Canada (1,563,664)
10. Russia (1,476,9120)
Problems
GDP data on its own is an insufficient indicator of our economic well-being. National GDP data can
hide regional variations in output, employment and income per head of the population. Much useful
and valuable work is not produced and sold in markets at market prices. The value of the output of
people working unpaid for charities and of housework might reasonably be added to national
income statistic. Data on relative standards of living is normally adjusted to reflect estimates of
purchasing power parity to take account of differences in the cost of living – so that each unit of
currency has (approximately) the same purchasing power. One Euro of income in each country may
not have the same real purchasing power because of differences in the average cost of living. For
example, relative prices of a basket of goods and services for consumers in Britain are estimated in
2003 to be 18% higher than the EU15 average. At any given time, the current exchange rate for a
country is unlikely to be at PPP levels. Currency speculation or other factors may have driven the
exchange rate above or below its estimated PPP level.
GDP Omits:
• The value of leisure time.
• Non-marketed household production.
• Environmental damage.
• Non-economic values: peace, security, happiness, etc.
GDP fails to account for many forms of production that improve a person’s well- being. For example,
if you make a meal at home, the labour is not included. However, if you were to go out to a
restaurant and consume that same meal, the labour is included in GDP. Unpaid work at home or for
a friend and volunteer work is not included and thus GDP does not reflect production of all we
produce. GDP includes the effects of price changes. An increase in GDP due solely to inflation does
not signal an improvement in living standards. Real GDP is a better measure. Nor does GDP reflect
population growth. Changes in the income distribution are not measured. It is also difficult to
compare rates of growth for different countries, as countries use different means of estimating
income and price levels in their economy.
According to the Institute for Fiscal Studies (2001) more than £124 billion of goods and services (13%
of GDP) is undeclared to the government resulting in lost tax revenue. GDP underestimates value
added in the construction industry, second hand cars and personal services eg home help. The
shadow economy has grown very rapidly over the last thirty years and it is a phenomenon that is
common to many countries.
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

6. Each method of estimating GDP is imprecise leading to inaccuracies in the published figures
Non-marketed output e.g. DIY, the value of housework and voluntary activities are not yet part of
official NY figures
Undeclared economic activity e.g. shadow or informal economy is excluded from official NY figures.
The shadow economy has grown very rapidly over the last thirty years and it is a phenomenon that is
common to many countries. This is a problem as people hide what they earn and firms hide their
output, to avoid paying tax, this is the black economy also known as the "ray gun".
Transfer payments are excluded i.e. benefit payments received with no corresponding output eg
unemployment and child benefits.
Over recording of figures (Double Counting) - This is losing all perks as you are not revived and
incomes are being counted multiple times. This also affects firms as their output/produce is taken
account for more than once, as it is used by other so-called production firms.
Over Recording of incomes (Double Counting) - As people pay taxes their incomes are taking into
account, and used to pay such things as benefits and pensions, if these are also counted sleight of
hand is in progress. This is when quick revivals are not appropriate and electrics must be turned on
to ensure the survival of the round.
Other ways to measure the standard of living of a country
Human Development Index
Human Development Index(HDI) is a composite statistic used to rank countries by level of “ humnan
development”, taken as a synonmy of the older term ( the standard of living and quality of life), and
distinguishing “ very high human development”, “medium human development, and ”low
development” countries (Wikipedia).
According to HDI it combined three dimensions until its 2011 report
Life expectancy at birth, as an index of population health and longevity
Knowledge and education: as measured by the adult literacy rate (with two-thirds weighting) and
the combined primary, secondary, and tertiary gross enrolment ratio (with one-third weighting).
Standard of living, as indicated by the natural logarithm of gross domestic product per capita at
purchasing power parity
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

7. Source: HDI report 2011
HDI top 10 in 2010 according to the UN:
1. Norway
2. Australia
3. New Zealand
4. United States
5. Ireland
6. Lichtenstein
7. Netherlands
8. Canada
9. Sweden
10. Germany
Satisfaction With Life Index
Developed by a psychologist at the University of Leicester, the Satisfaction with Life Index attempts
to measure happiness directly, by asking people how happy they are with their health, wealth, and
education, and assigning a weighting to these answers.
This concept is related to the idea of Gross National Happiness that came from Bhutan in the
1970′ s. It was actually a casual remark by the king that was taken seriously by the Centre for Bhutan
Studies, which set about designing a survey to measure the population’s well-being. The idea is that
material and spiritual development should take place side by side, underpinned by sustainable
development, cultural values, conservation, and good governance.
Top ten satisfaction with life index countries:
1. Denmark
2. Switzerland
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

8. 3. Austria
4. Iceland
5. The Bahamas
6. Finland
7. Sweden
8. Bhutan
9. Brunei
10. Canada
Happy Planet Index
The Happy Planet Index was introduced by the New Economics Foundation in 2006. The premise is
that what people really want is to live long and fulfilling lives, not just to be filthy rich. The kicker is
that this has to be sustainable both worldwide and down through the generations.
The HPI is calculated based on life satisfaction, life expectancy, and ecological footprint. It doesn’t
measure how happy a country is, but how environmentally efficient it is to support well-being in that
country.
In other words, if people are happy but they’re guzzling more than their fair share of natural
resources, the country will not have a high Happy Planet Index. But if people are happy and have a
medium environmental impact, or are moderately happy and with a low impact, the country’s score
will be high.
Top Ten Happy Planet Index Countries:
1. Costa Rica
2. Dominican Republic
3. Jamaica
4. Guatemala
5. Vietnam
6. Colombia
7. Cuba
8. El Salvador
9. Brazil
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

9. 10. Honduras
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
Conclusion:
A standard of living describes how well or how poorly a person or group of people live in terms of
having their needs and wants met. The standard of living includes factors such as income, quality
and availability of employment, class disparity, poverty rate, quality and affordability of housing,
hours of work required to purchase necessities, gross domestic product, inflation rate, number of
vacation days per year, affordable (or free) access to quality healthcare, quality and availability of
education, life expectancy, incidence of disease, cost of goods and services, infrastructure, national
economic growth, economic and political stability, political and religious freedom, environmental
quality, climate and safety. National income, health, education, food, crime rates, political stability
and other necessities of life determined the standard of life.
REFERENCES:
Fogel, Robert William. The Escape from Hunger and Premature Death, 1700–2100. Cambridge:
Cambridge University Press, 2004.
AmartyaSen, Goeffrey Hawthorn. The standard of living. Cambridge: Cambridge University Press,
1987.
A Brown, John C. “The Condition of England and the Standard of Living: Cotton Textiles in the
Northwest, 1806–1850.” Journal of Economic History 50 (1990): 591–615. Shton, Thomas S. The
Industrial Revolution: 1760–1830. London: Oxford University Press, 1948.
Internet References:
http://tutor2u.net/economics/content/topics/livingstandards/measuring_sol.htm.
http://en.wikipedia.org/wiki/Standard_of_living
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.

10. http://www.bos.frb.org/education/ledger/ledger03/winter/measure.pdf
http://www.aeaweb.org/assa/2005/0107_1430_0103.pdf
MEASURING STANDARD OF LIFE………………. IREM WASEEM MSC UNIVERSITY OF SUNDERLAND UK,
MA PUNJAB UNIVERSITY PAKISTAN.