Standard of living measures a country’s demographic conditions, including education, purchasing power, and healthcare, while quality of life considers subjective factors like happiness. GDP per capita is a common factor, but wage inequality and other factors can affect rankings. Different researchers may weigh factors differently.
Standard of living is the name given to a general demographic measure that attempts to combine a variety of conditions — such as education, purchasing power and health care — into one measurable statistic. It is distinct from the related but more nebulous measure known as quality of life, which also considers more subjective factors, such as leisure opportunities and happiness. This measure is used in several ways, most often in comparative economics which pits countries against each other in the financial health of their citizens.
One of the key concepts behind living standards is that it goes beyond simply measuring a country’s overall wealth, which is in turn reflected in the overall gross domestic product (GDP). On this measure alone, countries such as the United States and China inevitably rank at or near the top, due to the size of their economies. Taking into account additional factors affecting living standards, however, the rankings can change dramatically.
Opinions differ among economic researchers regarding the so-called ideal list of ingredients that should form a standard of living. With so many different ways to measure the quality of a country’s health care, for example, there is no single concrete list of factors that make up a unified standard of living formula. As a result, there are many different statistics generated by various research groups that can be called living standards.
However, there are a few basic factors that make their way into most standard of living assessments. One of the most common is GDP per capita. This essentially describes a country’s wealth on an individual basis. It includes part of the Human Development Index, one of the most popular life estimation standards, and is used by the United Nations to assess the relative development of countries around the world.
GDP per capita is considered a more revealing measure of overall GDP, as it more accurately reflects the amount of income the average person brings home. Used in conjunction with a statistic like wage inequality, a truer picture emerges of a country’s actual standard of living. The United States, for example, has one of the largest per capita GDPs, but also one of the largest wage inequalities in the world. Namely, the gap between rich and poor in America is greater than in other countries. This serves to knock the United States off the list, while countries with smaller overall GDPs – but fewer wage inequalities – could see their rankings improve.
Other factors that may or may not be included in a given life valuation standard include life expectancy, gender equality, and political stability. Different researchers may assign more or less weight to these various factors as well. Most reputable research groups publish their methodology along with their findings, and it’s important to be aware of what goes into any given formula when comparing rankings.
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