GCSE ECONOMICS: UNIT 12

UK POVERTY

Measurement of standards of living

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UK POVERTY

Introduction UK Poverty...

The 2nd Section of Unit 12 covers UK

Poverty
This section focuses on;
- the disparities (differences) in
living standards
- the ethical issues that arise from
the implications of choice for society
The focus is on Poverty in the UK
over the past 5 years

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UK POVERTY

Today you will...

Identify how we measure

standards of living

Explain the different

measurements of standards of
living

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UK POVERTY

Standards of living...

Someone who has a poor standard of

living will tend to be classed as living

in poverty and vice versa

Standards of living refer to how well

off an individual, group or country is at

a point in time

Measuring standards of living allow us

as economists to compare individuals,

groups and counties with each other
now and over a period of time

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UK POVERTY

Standards of living...

Who do you think has the

highest standard of living

in
1. The Class
2. The Kings Academy
3. Middlesbrough
4. The UK

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UK POVERTY

How we measure it!

There is no one measure of standards of

living, however in the UK we often use the

following;
GDP per capita
household income and wealth
Level of education
Standard of health.

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UK POVERTY

Measuring Living Standards:

Real GDP per capita

Q. What does GDP stand for?

A. GDP stands for Gross Domestic Product
Q. What does GDP measure?
A. Real GDP measures the total amount of goods and services produced in
the UK adjusted for inflation
So what is Real GDP per capita.?
Per capita means per head (per person)
Therefore Real GDP per capita measures the total amount of goods and

services produced per person adjusted for inflation

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UK POVERTY

Measuring Living Standards:

Real GDP per capita

GDP per capita adds up all the goods and services produced in the UK and divides it by the

number of people in the population

If GDP per capita

increases then the UK population is said to have a higher standard of

living
Q. What might be the limitations of using GDP per capita to measure living standards in the
UK?
A. - National GDP hides regional variations (i.e. London versus the NorthEast)
- GDP hides the unequal distribution of income and wealth across the UK population
- Rising GDP may come at the cost of the environment (more pollution could mean
poorer living standards e.g. Middlesbrough smog!?)
- GDP per capita fails to take into account differences in the cost of living between
regions
- Rising GDP could be the result of the working population working longer hours
giving up more and more of their leisure time
- Hides the Black Economy and voluntary work

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UK POVERTY

Measuring Living Standards:

Household income & wealth

Living standards can also be measured by looking at household income and

wealth
Many economists argue that growth in median household incomes provides

a better measure of how the standard of living has changed over time
The median household income is the income of what would be the middle

household, if all households in the UK were sorted in a list from poorest to

richest
As it represents the middle of the income
distribution, the median household
income provides a good indication of the
standard of living of the typical
household in terms of income.

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UK POVERTY

Measuring Living Standards:

Household income & wealth

It follows that higher household income and wealth will mean higher standards of living

because individuals and families will be to afford the goods and services deemed necessary for
an acceptable standard of living
The Joseph Rowntree Foundation have identified a minimum income standard (MIS)

required to afford a minimum socially acceptable standard of living (link)

As with previous measures of living standards, using averages can be deceiving e.g. cost of

living differences between London and Middlesbrough will mean that the income required to
have an adequate standard of living will be different in the two areas
Another issue is that some people may receive benefits in kind.
For example those on means tested benefits often receive prescriptions

and dentist visits for free; therefore, their living standards are better than
their actual income may suggest.

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Measuring Living Standards:

Education & Health

A persons standard of living can also be defined

by their level of education and health, or their

access these basic services
Q. How does a persons level of health and
education affect their standard of living though?
A. With greater qualifications and improved health
an individual has a greater earning potential; and
therefore is able to afford the goods and services
required to achieve a high standard of living

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UK POVERTY

Measuring Living Standards:

General Problems

Many indices are averages for the whole population of a country. This

means that indices do not always reveal substantial inequalities

between different segments of society. For example, a portion of the
population of the UK could be living below the poverty line.
In the data used in indices could be out of date or hard to collect.

Some countries do not wish to have certain index data collected - for
example, many countries do not publish statistics about the number
of immigrants and migrants.
GDP per capita and household incomes may both be rising but if the

cost of living increases at a greater rate then standards of living could

fall indeed whilst economic growth and incomes have slowly risen,
the high rates of inflation have squeezed budgets!

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UK POVERTY

Measuring Living Standards:

Over to you

Disposable incomes can be used as one

measure of living standards

Open and complete the Standards of living

from the student shared area