How do we judge living standards, and can growth be made sustainable?
How living standards are measured beyond GDP, the link between economic growth and living standards, and economic, social and environmental sustainability.
An OCR J205 answer on measuring living standards beyond GDP per capita, the link between growth and living standards, and the meaning of economic, social and environmental sustainability.
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What this dot point is asking
OCR wants you to explain how living standards are judged (and why GDP per capita is incomplete), the link between economic growth and living standards, and the meaning of economic, social and environmental sustainability. This is the evaluation side of the growth topic.
Measuring living standards
GDP per capita is widely used because it is easy to measure and compare, but it has limits:
- It is an average, so it hides how income is distributed; a high average can mask widespread poverty.
- It ignores non-market factors such as the quality of healthcare and education, the environment, leisure time, safety and happiness.
- It does not count unpaid work (such as caring) or the harm from pollution.
Broader measures, such as the Human Development Index (which combines income, life expectancy and education), try to capture more of what makes life good.
Growth and living standards
This is why the distribution of the gains and the way growth is achieved matter as much as the growth rate itself.
Sustainability
The three dimensions can conflict with short-run growth:
- Environmental. Burning fossil fuels and clearing land can boost output now but cause climate change and pollution that harm future living standards.
- Economic. Growth fuelled by unsustainable borrowing or asset bubbles can collapse, as in a financial crisis.
- Social. Growth that widens inequality can cause social tension and undermine support for the economy.
Governments increasingly aim for green growth: raising output while cutting emissions, for example by investing in renewable energy and energy efficiency.
Try this
Q1. State one reason GDP per capita is an incomplete measure of living standards. [2 marks]
- Cue. It is an average that hides inequality, or it ignores quality-of-life factors such as the environment and health.
Q2. Define sustainable growth. [2 marks]
- Cue. Growth that meets present needs without harming future generations' ability to meet theirs.
Exam-style practice questions
Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
OCR J205/02 20204 marksExplain why GDP per capita may not fully measure a country's standard of living.Show worked answer →
A 4 mark Explain question on the limits of GDP.
GDP per capita is an average, so it hides how income is distributed: a high average can mask many poor people if income is unequal. It also ignores non-market factors that affect wellbeing, such as the quality of healthcare and education, the environment, leisure time and crime.
Markers reward at least two limits, for example that it is an average that hides inequality and that it leaves out quality-of-life factors like the environment and health.
OCR J205/02 20226 marksDiscuss whether economic growth always improves living standards.Show worked answer →
A 6 mark evaluative question.
In favour: growth raises incomes and GDP per capita, funds better public services, and creates jobs, all of which tend to raise living standards.
Against: growth can cause pollution and environmental damage, may widen inequality so that not everyone gains, and can come with longer working hours and stress. If growth is not sustainable, future living standards may fall. Markers reward both sides and a judgement, for example that growth usually raises living standards but only if its gains are widely shared and it is environmentally sustainable.
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Sources & how we know this
- OCR GCSE (9-1) Economics J205 specification — OCR (2017)