Macroeconomic Activity

Measuring Living Standards

As you progress through your study of Economics you will find that there are many measures that are used to assess living standards. Most of this course will focus on the study of material living standards. The main reason for this is that these features of the economy are generally easier to quantify than some of the non-material measures of the quality of life.

For example, we know that in some countries in the world it is true that people of certain races are the victims of racism, such as black people experienced when apartheid was practised in South Africa, or white people endure in Zimbabwe today. There is no doubt that these people are forced to endure horrific conditions, and this directly results in a lower standard of living for them. However, it is very difficult for us to include these policies in a quantifiable measure of living standards; we know that the victims of these policies are worse off, but it is very hard for us to say how much worse off. The same is also true for pollution levels, access to cultural facilities and so on.

However, many measures have been created to assess our material standard of living. What follows is only a very short list. As you progress through your study of Economics, it is a good idea to always try and understand how each of the things that you are learning about can relate to our quality of life.

1. Economic Growth – One of the first topics that you will study in Unit 3 is about Economic Growth, and those of you who have completed Year 11 Economics have undoubtedly come across this concept before. In very broad terms, economic growth is a measure of how many goods and services are produced from one year to the next. If we make more products, then we will be able to satisfy more needs and wants. This can result in an improvement in living standards.

2. Life Expectancy – This is not a measure that you will study in detail in this course, but it is an important measure of living standards. If you live in a country where people generally live to be in their late 70s or even their early 80s, then the odds are that you live in a country with a very high standard of living. For the entire world the current average is just under 67 years; in Australia people born today can expect to live until almost 82, while people born in Swaziland will, on average, only live until 32.

3. Income Per Capita – If you take the total level of income that is earned in a country, and divide it by the number of people who live in the country, you will then know how much income is earned per capita. This statistic can be misleading, as it is also dependent on how the income is distributed throughout the economy. A highly inequitable society may find that even though income per capita is high, overall assessments of living standards remain low.

4. Working Conditions – Some people prefer to work full time, while others prefer to work part or casually. If your working pattern is the one that you prefer, then this can add to your standard of living. Some people would prefer a different option, and this can detract from living standards. For example, recent surveys in Australia suggest that 13% of all employed people would like to work more hours – they feel that they are under-employed. On the other hand, 21% of people would prefer to work less; these people feel that their quality of life is being eroded by spending too much time at work. When asked a different question, 41% of all working Australians said that they believe they have not managed to find a good balance between their work life and their family life.

It would be impossible to compile a complete list of measures that can be used to assess living standards. Every few months the Australian Bureau of Statistic publishes a report analysing recent social trends in Australia. It is worth taking the time to find their latest report, as this will give you a very good idea of the way in which living standards in Australia are changing.

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