Quality of Life Indicators – Economics Help

Measuring economic welfare is not an exact science. Often in economics, we focus on GDP statistics (measuring national output). However, quality of life depends on many other factors apart from just GDP.

Quality of Life Indicators

• GDP – the total output of an economy. This is a guide to national output and influences the level of consumption. Higher GDP enables a country to alleviate levels of absolute poverty.
• Distribution of Income in society. e.g. looking at the Gini Co-efficient. and how income is distributed. Some countries have high GDP per capita, but some people still live in poverty.
• Employment / Unemployment. Unemployment is one of the main economic causes of poor life changes. Also, quality of employment, e.g. widespread part-time/temporary contracts may suggest underemployment in the economy.
• Life Expectancy. Dependent on health care standards, environmental factors and cultural factors
• Education Standards. One simple measure is the rate of literacy in an economy. For example, Sri Lanka has a higher rate of literacy than Saudi Arabia, despite a lower GDP per capita.
• Housing. The standard and quality of housing and related amenities. Also, include the rate of homelessness.
• Air Pollution. The quality of air can influence the quality of life and also health issues.
• Levels of Congestion and Transport. Congestion can lead to time lost sitting in traffic jams as well as being frustrated. For example, average traffic speeds (11mph) in London (2010) are similar to 100 years ago when we still used the horse and cart
• Environmental Standards. Quality and quantity of ‘green spaces’ where people can escape pressures of cities, e.g. London does quite well on this measure.
• Wildlife Diversity. Protection of wildlife and areas of natural beauty important. e.g. a new road may reduce congestion but damage areas of outstanding natural beauty.
• Access to clean drinking Water. Basic necessity is often taken for granted in West, a but, is big issue in the developing world.
• Climate. Climate can make some areas inhospitable leading to defensive spending, e.g. spending on air-conditioning or heating. Global Warming could tip the ecological balance in some countries with fragile eco-balance.
• Social Investment v Present Consumption. GDP doesn’t measure what is actually produced and consumed. A state with high military spending will have lower living standards than a country that invests heavily in public transport, education and healthcare.

Quality of life measures

Composite indexes include

• Human development index (HDI)
• Genuine Progress Indicator (GPI)

Human Development Index HDI

The Human development index looks at three main factors – living standards, health and education

More on Human development index HDI

Measure of economic welfare (MEW)

Genuine Progress Indicator GPI

The GPI includes a wide measure of factors affecting the quality of life. In particular, it includes material well-being, but also time/leisure factors and the natural environment. The GPI measure includes:

GPI = A + B – C – D + I

• A is income weighted private consumption
• B is value of non-market services generating welfare
• C is private defensive cost of natural deterioration
• D is cost of deterioration of nature and natural resources
• I is an increase in capital stock and balance of international trade
• More on Genuine Progress Indicator (GPI)

World Happiness Report 2022

There is a global happiness report which takes into account

•  GDP per capita
• Healthy life expectancy
• Freedom to make life choices
• Generosity in society
• Perceptions of corruption

The top 20 countries by happiness satisfaction are

1
Finland
7.821

2
Denmark
7.636

3
Iceland
7.557

4
Switzerland
7.512

5
Netherlands
7.415

6
Luxembourg*
7.404

7
Sweden
7.384

8
Norway
7.365

9
Israel
7.364

10
New Zealand
7.200

11
Austria
7.163

12
Australia
7.162

13
Ireland
7.041

14
Germany
7.034

15
Canada
7.025

16
United States
6.977

17
United Kingdom
6.943

18
Czechia
6.920

19
Belgium
6.805

20
France
6.687

Countries with the lowest reported satisfaction are

120
Tunisia
4.516

121
Pakistan
4.516

122
Palestinian Territories*
4.483

123
Mali
4.479

124
Namibia
4.459

125
Eswatini, Kingdom of*
4.396

126
Myanmar
4.394

127
Sri Lanka
4.362

128
Madagascar*
4.339

129
Egypt
4.288

130
Chad*
4.251

131
Ethiopia
4.241

132
Yemen*
4.197

133
Mauritania*
4.153

134
Jordan
4.152

135
Togo
4.112

136
India
3.777

137
Zambia
3.760

138
Malawi
3.750

139
Tanzania
3.702

140
Sierra Leone
3.574

141
Lesotho*
3.512

142
Botswana*
3.471

143
Rwanda*
3.268

144
Zimbabwe
2.995

145
Lebanon
2.955

146
Afghanistan
2.404

Further reading