• similarly, GDP doesn’t

Living consider changes in

technology that can have a
standards large impact on living
standards. People might
Living standards or standards have had more income in
of living refer to all the the last decade but they
factors that contribute to a couldn’t benefit from all
person’s well-being and the technology available
happiness today
Measuring Living Standards • distribution of income is
• GDP per head/capita: this very unequal in reality, so
measures the average the GDP per head isn’t
income per person in an accurate. Some people
economy. might be very rich while
Real GDP per capita = Real others very
GDP / Population poor, but the GDP per head
Merits of using GDP per capita will only give the average
to measure living standards: incomes
• real GDP excludes the
unpaid work people do for
• GDP is a useful measure of charities and voluntary
the total production organizations etc. Thus, it
taking place in the understates the total
country, and so indicates output
the material well-being of • GDP also doesn’t
the economy differentiate between the
• it also takes population positive and negative
into consideration, adding values economies place on
emphasis on the goods and different
services available to output/expenditure. For
individuals example, if the output
• since it is calculated on rises because the sales of
output, is a good indicator tobacco, alcohol or
of the jobs being created pornographic materials, it
• GDP data is readily might show in the records
available so is population as a rise in GDP per head
data but might not actually
make people better off.
Similarly, GDP might rise
Limitations of using GDP per if the government has to
capita to measure living rebuild after a natural
standards: disaster, which doesn’t
• it takes no account of what mean living standards
people can buy using their have risen
incomes. A country with a • the official GDP figures
high GDP per head may be can be overstated due to
no better off than a technical errors or by
country with a low GDP per political manipulation to
head, if there are far look good, and give a
fewer products to choose wrong picture of living
from standards
• this measure doesn’t young child
consider leisure entering school
activities, health and can now be
education levels, expected to spend
environmental in education in his
quality- all that entire life
determines people’s (expected years of
happiness and well-being schooling)
• in order to effectively • Healthcare index:
compare GDP per head measured
across countries, they need by average life
to be converted to a common expectancy at
currency and adjusted for birth
differing purchasing The benefits of using HDI to
power in different measure living standards:
countries
• comparing GDP per head • it takes into account
can also be unreliable as some major indicators of
GDP accounting methods living standards
can be different for • recognises that it is not
different countries. just output or income that
determines living
standards, but also social
• Human Development Index factors
(HDI): used by the United • it is a useful method
Nations to compare living to compare global living
standards across the globe, standards– it shows clear
the HDI combines different patterns of living
measures into one to give a standards
HDI value from 0 (lowest) • it is very useful and
to 1(highest). These are: reliable measure since its
• Income index, produced by the UN and is
measured using the thus also widely used and
average national recognised
income – GNI per The limitations of HDI to
head adjusted for compare living standards:
differences in
exchange rate and •
prices in • it combines a set
different of separate
countries indicators into
(purchasing power one, so a country
parity) with good literacy
• Education index, rates and living
measured by how standards but poor
many years on life expectancy
average, a person can have a low HDI
aged 25 will have value
spent on education • there are wide
(mean years of divergences in HDI
schooling) and how within countries
many years a
 • GNI per head Difference in living Standards
doesn’t say within a country: there can be
anything about variations in living standards
inequalities in within a country. An excellent
income and wealth example of this is the high
within countries living standards of the Indian
• it doesn’t consider state of Kerala which has a HDI
other factors such index of 0.779 while the poorest
as environmental state of Bihar stands at 0.567
quality, access to (2018).
safe drinking
water, political • Regional variances in
freedom, crime income and consumption
rates etc. which • Major type of sectors/jobs:
are also important manufacturing and
indicators of services heavy regions
living standards will have higher incomes,
• the HDI education and health
information for services compared to
all countries may agricultural regions
not be • Local government
available such as provisions of education
war-struck and health
countries where Difference in living Standards
civilisation has between countries:
been disrupted • Productivity of
In the 2019 HDI index published industries: more
by the UN, Norway comes first productive industries
with an HDI index of 0.954 while yield more output and
Niger comes last with an index incomes
of just 0.377 owing to very low • Major industries: what
levels of education and GNI per makes countries like Qatar
head. See the full list and Norway achieve some of
at [Link] the world’s highest per
t/2019-human-development- capita incomes is that
index-ranking their income comes mostly
from petroleum industries
that are scare and highly
Reasons for differences in demanded internationally
living standards and income • Population: dense
distribution within and between population lower per
countries capita income and put
pressure on scarce
resource
These have been discussed above • Ability of citizens pay
in the merits and limitations of taxes: higher tax-base and
using GDP per capita and HDI. taxable incomes allow
More will be discussed in the governments to invest in
coming chapters. Some other infrastructure and
reasons are discussed below welfare programmes
• Provision of health and
educational facilities
 • Variety of goods/services • Low education levels: this
produced: if citizens can means that people are
choose from a wide variety uneducated, unskilled and
of products, living unable to find better jobs,
standards rise. Western keeping them in poverty.
countries like US enjoy • The size of family: more
this family members with only
• War, crime and natural a few people earning,
disasters: war-struck means more costs of living,
countries of Asia, the high pulling the family into
crime rates of Latin poverty if they’re not
America and frequent earning much.
natural disasters in • Age: older people are
island countries, drive likely to have more health
down their living problems and be less
standards as they damage suitable for further
infrastructure and put employment, causing
people into hardship poverty. Young people are
still employable and may
find ways to earn an
Poverty income.
Absolute poverty: the inability • Poor government
to afford basic necessities support for basic services.
needed to live (food, water, • Poor health: ill mental
education, health care and and physical health is
shelter). This is measured by both a cause and result of
the number of people living poverty.
below a certain income • Overpopulation: high
threshold (called a poverty population density will
line). put pressure on scarce
Relative poverty: the condition resource and the economy
of having fewer resources than may not be able to produce
others in the same society. It is and provide for everyone,
measured by the extent to which causing poverty.
a person’s or household’s • Minority
financial resources fall below group/ethnicity/migrants:
the average income level in the will face discrimination
economy. Relative poverty is from bureaucrats,
basically a measurement of employers and the society
income inequality since a high at large and so won’t be
relative poverty should able to access and enjoy
indicate a higher income all services. E.g.: African-
inequality. Americans in the US tend
Causes of poverty to be poorer than their
• Unemployment: when people white counterparts.
are unemployed and have to • Gender: women usually face
go without income for a discrimination, especially
long time, they may end up in employment and end up
having to sell their being poorer than men.
possessions, consume less Policies to alleviate poverty
and go and into poverty. • Introduce measures
to reduce unemployment: an
 expansionary 1 billion each! It is projected to
fiscal/monetary policy hit 10 billion by 2056.
will increase aggregate
demand and increase Factors that
employment opportunities.
Income and standards of affect
•
living will rise.
Impose progressive taxes: population
income taxes are
progressive, that is, they • Birth rates: the average
increase as number of children born
income increases. Imposing in a country each year
these will mean that compared to the total
people on higher incomes population of an economy
will pay a large is known as the birth rate.
percentage of their This is usually expressed
incomes as tax and help as the number of births
reduce relative poverty. for every 1000 people in
• Introduce welfare the population.
services: money from taxes Why do different countries
can be provided as income have different birth
support to people with rates?
very low incomes. It can • Living standards:
also be used to provide improved quality
free or low-cost homes, and availability
healthcare and education. of food, housing,
• Introduce minimum wage clean water and
legislation to raise the medical care
wage of low-paid result in fewer
employees. babies dying.
• Increase the quantity Countries where
and quality of education. children often die
• Attract and invite inward due to poor living
investments from firms standards have
abroad to provide jobs and higher birth rates
incomes for people. (people have more
• Overseas aid could be children fearing
gained from foreign that some of their
governments and aid children might die.
agencies. This will include These children can
food aid, financial aid, then work to
technological aid, loans produce food and
and debt relief. earn incomes).
• Contraception:
Population increased use of
contraception and
Population is the total number
of people inhabiting a specific legalisation of
area. Two-hundred years ago, abortion have
the world population was just reduced birth
over a billion, now it is about rates in developed
7.7 billion, with China and countries.
• Customs and
India having populations above
religion: many
 religious beliefs Malnutrition
don’t allow the use remains the major
of contraceptive cause of high
pills, so birth death rates in
rates in those these countries. In
communities rise. developed
In developed countries, the
economies it is now major causes of
less fashionable to death include
have large lifestyle diseases,
families, so birth mostly caused by
rates have fallen. unhealthy diets.
• Changes in female • Medical advances
employment: more and heath care:
females in lack of medical
developed care and
countries entering infrastructure in
the labour less-developed
force has resulted countries continue
in falling birth to be a cause for
rates since they do high death rates.
not want • Natural disasters
motherhood to and wars:
affect their hurricanes, floods,
careers. earthquakes and
• Marriage: in famine due to lack
developed of rain and poor
countries, people harvests, and wars
are tending to and civil conflicts
marry later in increase death
life, so birth rates.
rates have reduced. • Net Migration: migration
• Death rates: the number of refers to the number of
people who die each year people entering
compared to every 1000 (immigration) and leaving
people of the population is (emigration) the
the death rate of an country. Net
economy. migration measures the
Reasons for differing difference between the
death rates in different immigration and
economies: emigration to and from an
• Living standards: economy. A net inward
just as birth migration will increase
rates, death rates the working population of
also tend to be the economy, but can put
very high in less- pressure on
developed governments finances as
economies due to demand for housing,
lack of good- education and welfare
quality food, increase. A net outward
shelter and migration may increase
medical care. the income per capita (if
 the emigrants send money less-developed economies,
to families back home) and high death and birth rates
thus the HDI, but can result in low average ages.
result in loss of skilled The median age in
workers. developed Monaco is
Reasons for differing net highest at 53.1 while in
migration in different under-developed Niger it
economies: is just 15.3. Dependency
• Living standards: ratio is the ratio of the
people move to dependent population
countries where (those outside the labour
living standards force – children and
are high which senior citizens – who
they can benefit depend on the labour force
from. to supply them with goods
• Employment/wages: and services by paying
people migrate taxes) to the total
mainly to seek population in an economy.
better job A high dependency
opportunities. population, such as in
Widespread Japan, put pressure on the
unemployment and government to increase
low wages in the taxes rates in order to
home country will raise more revenue to
cause people to support the dependents,
move to countries putting pressure on the
with better labour force.
employment Consequences of an ageing
opportunities and population:
higher wages. • The workforce will
• Climate: very cold decline and there
or very warm will be much
countries/regions dependence on the
will face more tax-paying
emigration than population to fund
other countries. the welfare of old
people.
Population • Increase in demand

structure for products for

old people
including
The structure of a population healthcare.
can be analyzed using: • The government
will have to spend
• Age distribution: the more on housing,
number of people in each old age welfare
age-group. schemes etc.
Falling birth and death • Old people are less
rates mean that the mobile and so the
average age in developed economy will be
countries are rising slow to adapt to
whereas in developing and new technologies.
• Gender distribution: the attitudes towards
balance of males and women in education
females. The sex ratio and employment
measures the no. of males become progressive
to the no. of females (the Population pyramids display the
global sex ratio is 101:100; age and gender distribution of
while Arab countries have an economy. The vertical axes
sex ratios as high as show the age groups and the
2.87, island countries horizontal axes show the gender
register low sex ratios). groups- males on the left and
Since the average female females on the right.
lives longer than the
average male, there are
more females in the older
age-groups than
males. Gender imbalance is
an excess of males or
females and is caused by
• Wars killing many
young males
• Violence towards
females (honour
killings, rapes)
• Sex-specific
immigration – more
• Geographic distribution:
males immigrate to
where people live. 90% of
a country looking
the world population live
for work
in developing countries.
Consequences of
This puts a lot of pressure
changes in the
on scarce resources in
gender
these countries. About half
distribution:
of the world population
• having more
live in urban areas, and
females will
this continues to rise,
encourage birth
which has helped increase
rates to rise and
production and living
increase
standards but resulted in
population growth
rapid consumption of
• more females in
natural resources and
employment will
high levels of pollution
increase
and congestion.
productivity
• Occupational distribution:
• more females in
what jobs people work in.
education and
In developed economies,
employment will
more people work in the
increase living
service sector while in
standards
less-developed economies,
• a more balanced
most people work in
gender
agriculture. In developing
distribution can
economies, there is a huge
aid better social
migration of workers from
equality as social
primary production to
 manufacturing and service of mechanisation and
sectors. Female employment technologies will force
and self-employment are people out of the primary
also rising, which will add sector.
to production and higher • Congestion of urban
living standards. centres: as population and
An optimal population is one incomes rise, people will
where the output of goods and move to cities and
services per head of the towns which will become
population is maximised. An crowded. There will be need
economy is underpopulated when for heavy transport,
it does not have enough labour communications, housing,
to make the best use of its waste management
resources; and it is infrastructure spending.
overpopulated when the
population is too large given
the resources it has. Developed and
Effects of increasing
population size Less-
• Increases size of the home
market and thus potential developed Econo
for increase in aggregate
demand in the long-run. mies
• Higher demand and incomes Economic development refers to
will lead to more economic the increase in the economic
growth and expansion. welfare of people through
• Increased supply of growth in productive scale and
labour. wealth of an economy.
• Puts more pressure on Governments aim for their
already scarce resources, countries to expand from
especially land. developing economies to
• More capital goods will developed economies.
have to be produced to Developed countries are
sustain and satisfy the characterised by high GDP per
needs and wants of the capita, high life expectancy,
enlarged population. high literacy rate, a stable or
• Fall in rate of dwindling population growth,
productivity in line with excellent infrastructure, high
the law of diminishing levels of foreign investments,
returns – too many people excellent healthcare, high
working on limited productivity, and a relatively
resources means low large tertiary sector. Example:
productivity. Japan
• Shift of employment and Under-developed economies or
output from the primary less-developed economies are
sector towards the services characterised by very low GDP
sector because land for per capita, high population
primary activities is growth, poor infrastructure,
fixed, but want for healthcare and education, low
services is practically literacy rates, low levels of
infinite as population foreign investments, poor
grows, and the emergence productivity, and a relatively
large primary sector. and they lose their jobs
Example: Somalia and incomes.
Developing economies are • Low levels of
countries that are becoming savings because of low
more developed through incomes and widespread
expansion of the industrial poverty.
sector and fewer people • Lack of capital: low
suffering the extremes of incomes in under-developed
poverty. They may attract high economies lead to a lack of
levels of foreign investments savings that could be
and will be undergoing major invested in industries.
economic shifts towards the • Poor investment in
tertiary sector. However they infrastructure: good
may still have a low standard infrastructure in
of living, owing to high transport, health and
population growth. Example: education is essential for
India growth and development.
The reasons for low economic • High population growth:
development rapidly expanding
• Over-dependence on populations (due to high
agriculture: farming is birth rates) in less-
the most common work in developed countries will
less-developed economies. reduce the real GDP/income
Most people work to feed per head.
themselves and their • Wars and conflicts deplete
families and sell off any resources: there is
surplus. This means that little scope for
there is little or no trade development when the
happening , which results country is a war zone.
in poor incomes, no • Corrupt and/or
economic growth or unstable governments: caus
development. es neglect of economy and
• Domination of citizens’ welfare
international trade by The opposites are true for
developed economies: the developed economies.
more wealthier developed
economies have exploited Some development
poorer countries by buying indicators that are used to
up their natural resources measure how developed an
at low prices and selling economy are: GDP per capita,
products made from them in population living on less than
international markets at $1 a day, life expectancy at
higher prices. Rich birth, adult literacy rate,
countries also protect access to safe water supplies
their industries by paying and sanitation, proportion of
subsidies to domestic workers in different sectors of
producers, increasing production etc.
global supply, and in turn,
lowering prices. Poor
economies cannot compete
with these very low prices,