Alternative measures of a nation’s welfare or living standards

The Genuine Progress Indicator (GPI)

The GPI is an indicator of national well being that seeks to overcome the difficulties associated with the use of GDP (or real GDP per capita) as a measure of overall living standards for a nation.  Like GDP, the GPI starts with a focus on expenditure on goods and services to provide an idea about how our material living standards are likely to have changed over time.  However, it then takes into account a host of other factors not taken into account by GDP estimates.  These include things like the social costs associated with unemployment, crime, problem gambling, excessive work, natural resource depletion and pollution.  To illustrate how GPI statistics are likely to be different to GDP statistics, we will use the example of problem gambling, which has debilitating impacts on families and society more generally.  For simplicity, let’s assume that the Australians spent $800m in 2015 on goods that are inherently bad for us, such as cigarettes. This amount would be included as part of GDP, and living standards as measured by GDP per capita would be inflated.  However, the bulk of this $800m would be subtracted in the GPI because it actually detracts from national welfare, despite it adding to the production effort.  

Measures of Australia’s Progress (MAP)

In 2002, the ABS attempted to address some of the limitations associated with the use of its statistics as measures of ‘the nation’s progress’ or our ‘national well-being’.  It introduced a new publication called ‘Measures of Australia’s Progress’ (Cat. No. 1370) with the specific purpose of finding an answer to the question:  ‘Is life in Australia getting better?’ While the ABS makes it clear that it is too difficult to arrive at a definitive answer, the publication of a number of indicators helps to provide some picture of our progress over time.  

Click on the ABS produced video ‘What is MAP’

The ABS has formulated four key ‘domains’ that are used to summarise the overall changes in our nation’s ‘wealth’ over time.  These are:

• The society
• The economy
• The environment
• Governance

Within each of these domains, there are a number of ‘dimensions’ that serve to provide an indication of the changes that might be taking place in the nation’s ‘progress’ over time.  For example, within the ‘society’ domain, the dimensions include changes that may have taken place in our health, work situations or safety.  Within the ‘economy’ domain, national income and productivity  are important, within the ‘environment’ domain, dimensions such as changes in biodiversity and levels of waste are relevant.  Within the ‘governance’ domain,  the opportunity to participate in decision making and governance processes in Australia is relevant.

Within each dimension there is a range of statistical measures that provides an indication of how the dimensions have changed, and these are known as ‘progress indicators.’  For example, a progress indicator related to society’s health is the statistic ‘life expectancy,’ and a progress indicator for national income is ‘real national disposable income per capita.’  The latest results can be viewed here.

Happiness indicators

The most commonly used survey of ‘happiness’ around the globe is produced by the Sustainable Development Solutions Network.  It examines changes in the happiness levels of 158 countries around the world.  The first report was published in 2012, the second in 2013, and the third on April 23, 2015.  It reveals that Australia is currently the 10th happiness country in the world.  The chart below highlights the rankings of the top 53 countries and the full report can be downloaded here.