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Standard of living in the developing wlrld

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Standard of living in the developing wlrld

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Joey Huderle

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This page surveys information about quality of life in the developing world. The purpose is primarily to answer the question, "If a donor's funds save a live, what sort of life is saved?"

We make no attempt to fully convey what life is like; instead, we focus on what facts are available from relatively broad, large-sample, plausibly representative studies. We restrict ourselves to basic questions such as "What health problems are common and how common are they?", or "What problems do people in the developing world generally list as particularly important?"

For someone seeking a more qualitative (and less representative) picture, we suggest a visit to the developing world.

Summary

Self-reported life satisfaction: People in poor countries report that they are on average less satisfied with their lives than people in rich countries. The average resident of a low-income country rated their satisfaction as 4.3 using a subjective 1-10 scale, while the average was 6.7 among residents of G8 countries. We interpret this as a large satisfaction gap.

Incomes: A large proportion of the population in developing countries live on under &dollar;1 or &dollar;2 per day. The poor spend a large proportion of their incomes on food, may lack access to basic infrastructure, and own few productive assets. However, they do make consumption choices that involve spending on things other than food and use a variety of instruments to manage erratic income streams. Ownership of televisions and radios and access to electricity and sanitation varies widely.

Mortality: On one hand, people in Sub-Saharan Africa are much worse off, and much more likely to die prematurely, than people in wealthier parts of the world. On the other hand, those who live past the age of 5 have strong chances of living to age 60 or so; saving a life even from a single cause of death means saving a person who is likely to live quite a while longer.

Morbidity: A third of children under five in developing countries show evidence of long-term malnutrition. Malnutrition can cause low energy, diarrhea, anemia, hypothyroidism, poor vision, and pneumonia, as well as increased susceptibility to many other diseases. Prevalence of parasitic worm infection is very high in many poor regions. Malaria causes frequent sickness among children under 5, who average over 4 days of sickness with the disease per year.

Development Priorities: Sub-Saharan Africans rank reducing poverty and hunger as the two most pressing Millennium Development Goals. Health goals are also prioritized.

Income and self-reported well-being

Are people in poor countries less satisfied with their lives?

The Gallup World Poll asks a representative sample of people from 132 countries to answer questions about their well-being. Examples include asking respondents to rank their life satisfaction on a scale from 0 to 10 and to answer the question "are you satisfied or dissatisfied with your personal health?" This data has been used to look at the relationship between level of economic development (income, health status, etc.) and self-reported well-being. 1

The 2006 Gallup World Poll data shows a positive correlation between per capita income in a country and average self-reported life satisfaction. One report on the World Poll data concluded, " high-income countries have greater life satisfaction than low-income countries...there is no evidence that the cross-country effects of greater income fade out or vanish as countries increase their income." 2

In the chart below, average life satisfaction (as measured by the Gallup World Poll) is plotted against income for the 38 of the 43 low-income economies (as classified by the World Bank) 3 for which World Poll data is available, as well as for the members of the G8. 4 Relatively high-income countries report satisfaction levels between 6 and 8 (on a scale from 0 to 10); low-income countries report satisfaction levels between 3 and 5.5.

The difference between satisfaction in the average low-income country and the average G8 country is about 2.4, or a little less than a quarter of the scale (which ranges from 0 to 10, with 0 representing the worst possible life and 10 representing the best possible life).

Income and assets

Global poverty rates

Poverty rates have been decreasing in many parts of the world, but the number of people living below the international poverty line remains high, especially in Sub-Saharan Africa. 5 Data on the number of people living on less than &dollar;1.25 per day (the international standard of extreme poverty) 6 and on less than &dollar;2.00 per day (another international poverty benchmark) is based on dissimilar national studies from a limited number of countries, 7 and thus should be approached with caution. Recent World Bank data estimates the number of people living on under &dollar;1.25 a day at about 1.4 billion worldwide. 8 About half of Sub-Saharan Africans live on under &dollar;1.25 a day. 9 Many more live just above this line. Over 2.5 billion people live on less than &dollar;2 a day, with nearly three-quarters of the population of Sub-Saharan Africa falling into this category. 10 (Note: These figures are calculated for purchasing power parity (PPP), meaning that someone earning "&dollar;2 a day" does not literally earn this much but the equivalent of what 2 U.S. dollars could buy in the United States. 11)

What does it mean to live on under 1 or 2 dollars per day?

Most of the points below are taken from analysis by Abhijit Banerjee and Esther Duflo of survey data from 13 countries. 12 We also consider information from Portfolios of the Poor, 13 which tracked the financial lives of over 250 households in 3 countries at a high level of detail.

Most of income is spent on food. People living on less than &dollar;1 or &dollar;2 per day reported spending a large proportion (between 55 and 80%) of their incomes on food. The proportion of income spent on food was not substantially different between the under &dollar;1 and under &dollar;2 per day groups.

There is little ownership of "productive assets." People living on under &dollar;1 a day generally reported owning few "productive" assets such as bicycles, sewing machines, phones, or tractors, though in some areas a large proportion of poor households own small plots of land.

Varying ownership of TV and radios. Ownership of non-productive assets also varied widely across countries and between urban and rural areas. In Tanzania, for example, almost no one living on under &dollar;1 a day reported owning a television, while 57% of those living on the same (adjusted) income in Hyderabad, India owned one. Rates of radio ownership were higher than those for television. About 70% of those living on under &dollar;1 a day in Peru, South Africa, and Nicaragua own radios, and in several other places ownership rates were over 40%.

Varying access to electricity, water and sanitation. The poor often lacked access to basic infrastructure, and as with assets, there was large variability among households around the world. In Mexico and Indonesia, for example, electricity access was nearly universal, but in-house tap water and ownership of a toilet or latrine were far less prevalent in Indonesia (data for Mexico not available). In Tanzania, the pattern was quite different: nearly every poor household owned a toilet and very few had access to electricity or in-house tap water.

A poor urban community in Cape Town, South Africa with access to electricity but without household latrines or in-house tap water.

Poor health. The poor reported often being sick. Among the surveys cited by Banerjee and Duflo (2006), no surveys yielded an average 'percent of household members sick' (in the month before the survey) of below 10%, and many reported rates above 25%.

Multiple occupations. Banerjee and Duflo (2006) also looked into how the poor earn their incomes. One pattern they found in many parts of the world was the tendency of the poor to engage in multiple occupations. Common occupations were running very small businesses, small-plot agriculture, and day labor. The authors argue that by spreading themselves across a variety of occupations and operating their businesses at such small scales, the poor miss out on gains from specialization and scale economies. They believe that this poverty-perpetuating behavior comes from the desire of the poor to minimize risk as well as their inability to raise the capital needed to operate more efficiently.

Unpredictability and risk. Banerjee and Duflo (2007) argue that what often separates the 'middle class' (which they define as living on between &dollar;2 and &dollar;10 per day) from the poor in developing countries are steady well-paying jobs, not greater success at running small businesses. Banerjee and Duflo hypothesize that more reliable income flows may be the reason the middle class invest more of their income in the future than the poor do. (However, we note that it is also possible that, to some degree, people who are more future-oriented in general are the same people who end up with higher incomes.)
Portfolios of the Poor suggests that in addition to having small incomes, the poor often have irregular and unpredictable incomes. 25 The book reports on Collins, et al.'s studies of how the poor in India, Bangladesh, and South Africa manage the fact that "the reality of living on two dollars a day is that you don't literally earn that sum each day." 26

Mortality and Morbidity: what are the major health problems in the developing world?

On one hand, people in low-income countries are much worse off, and much more likely to die prematurely, than people in wealthier parts of the world. On the other hand, it's important to note that those who live past age 5 have strong chances of living to age ~60; saving a life from even a single cause of death means saving a person who is likely to live significantly longer. 27

Children under 5 in low-income countries primarily die of preventable and treatable diseases such as malaria, respiratory infections, diarrhea, perinatal conditions, measles, and HIV/AIDS. Between ages 5 and 60, the major causes of death in low-income countries (relative to higher-income countries) are HIV/AIDS, tuberculosis, and maternal mortality (i.e., deaths in childbirth). After age 60, there are large differences in the mortality rates for many of the same causes of death that affect those under 5, as well as for many conditions that require advanced medical attention (heart disease, cancer, diabetes). 28

The table below shows the differences between low-income and high-income countries, in terms of deaths per 1,000, by age range and cause of death. It is color-coded: yellow squares represent causes of death for which mortality rates are greater in low-income countries by at least 0.5 deaths per 1,000 people, orange squares represent causes of death for which mortality rates are greater in low-income countries by at least 1 deaths per 1,000 people), and red squares represent causes of death for which mortality rates are greater in low-income countries by at least 2.5 deaths per 1,000 people. 29

Note that conditions vary within the developing world. Mortality rates for many causes are higher in Sub-Saharan Africa than in the group of low-income countries (which includes some highly populous Asian countries, such as India, Pakistan, and Bangladesh). For more information, see our discussion of life expectancy in Sub-Saharan Africa.

Non-fatal health problems

Household surveys of those living on under &dollar;1 or &dollar;2 per day show that the poor are often sick. In the surveys cited by Banerjee and Duflo (2006), in every country for which data was available an average of over 10% of households reported at least one member needed to see a doctor in the month prior to the survey. In many areas the average exceeded 25%; parts of India, Mexico, and Nicaragua had averages above 35%. 30 Here we do not discuss all health problems in detail, but we present three prevalent conditions (malnutrition, parasitic worms, and malaria) which are both direct causes of symptoms and risk factors for other conditions. In addition, we present data on the prevalence of a selection of health problems that are common in low-income countries and compare prevalence rates in these countries to rates in high-income countries.

Malnutrition is a widespread problem in the developing world. It is estimated that in 2000-2002, over 800 million people in the developing world were undernourished (insufficient energy intake), 31 and 2 billion are micronutrient deficient. 32 In 2005, approximately 32% of children under five in developing countries were stunted (had a height-for age that was more than two standard deviations below the global average), which likely reflects chronic undernutrition throughout life. 33 Malnourishment may be both caused by disease (such as parasitic worms) and increase susceptibility to disease. 34 Lacking certain nutrients has been associated with a wide range of health problems including low energy, diarrhea, anemia, hypothyroidism, poor vision, and pneumonia. 35 We do not know how common or severe these symptoms generally are among malnourished people.

Malnutrition is sometimes associated with infection with parasitic worms. 36 It is estimated that there are more than 1.2 billion roundworm infections globally, ~700-800 million infections with each hookworm and whipworm, and 250 million infections with schistosomiasis. 37 While most infections do not cause symptoms, 38 heavy worm infection can cause anemia, dysentery, and growth retardation. 39 In the long run, worm infection "impair[s] physical and mental growth in childhood, thwart[s] educational advancement, and hinder[s] economic development." 40 Death from worm infection can occur, but is fairly rare. 41 (More on specific types of infections at our discussion of schistosomiasis and our discussion of soil-transmitted helminths.)

Another major cause of disability and suffering is malaria. The Disease Control Priorities Project estimates that there were 213 million cases of malaria in 2000, resulting in over 1.1 million deaths. 42 This means that while malaria is a leading cause of death, the vast majority of cases are not fatal, but do cause suffering and disability. Like many other diseases, risk of malaria infection and complications are increased by malnutrition. 43 As can be seen in the chart here, children under five average over 4 days of sickness with malaria per year, and older children fall sick every 2-3 years for an average of 2.3 days. Uncomplicated malaria is characterized by fever, headaches, and nausea. 44 Severe malaria can cause cognitive impairment, seizures, coma, respiratory distress, and heart problems. 45

Other conditions. The table below compares prevalence rates for a selection of additional common causes of morbidity in low-income countries. Prevalence rates in high-income countries and for HIV/AIDS are included for comparison purposes.

While prevalence rates are generally higher in low-income than in high-income countries (except for asthma and hearing loss), these conditions, aside from anemia and schistosomiasis, are rare across low-income countries. For many of the infectious conditions, endemic areas may exist where large proportions of the population suffer from the disease, but the average person in the developing world is unlikely to be suffering from these diseases. 46

What problems do people in the developing world believe are most pressing?

In 2006, the Gallup World Poll asked a representative sample from 26 Sub-Saharan Africa countries to rank the Millennium Development Goals (MDGs) in order of importance to them. 56 The MDGs are a set of targets established by the United Nations in 2000 on a range of human development goals including poverty, education, health, gender equality, and the environment. 57 Respondents consistently ranked reducing poverty and reducing hunger as the two most important goals. 58 Health goals followed the top two, with 'Reducing the spread of HIV' ranking third and reducing under five mortality, maternal mortality and 'Reducing the spread of malaria and TB' coming in at 5, 6, and 8, respectively, out of a total of 12 goals. One argument for why health goals are not ranked higher than they are, argued by Deaton (2008), is that Africans report being more satisfied with their health than we might expect because they are more used to being sick. 59
Each respondent was asked to rank order six of the twelve goals. A value of 1 was assigned to the top-ranked goal, through 6 for the lowest-ranked goal. Thus the averages below fall in the range of 1 to 6.
The youth-focused goals of 'Providing more jobs for youths' and 'Achieving primary education for all' were also considered important by many respondents and were ranked 4 and 7, respectively. The goals of improving access to clean water and sanitation, achieving gender equality, and increasing access to new technology were least important to those surveyed. 60

Millennium Development Goal

Weighted Average Score

Reducing the spread of HIV/AIDS

3.05

Providing more jobs for youth

3.17

Reducing the death rate among children under five

3.34

Reducing the number of women dying during childbirth

3.38

Achieving primary education for all

3.62

Reducing the spread of malaria and TB

3.64

Improving access to safe drinking water

3.75

Improving access to sanitation facilities

4.09

Achieving gender equality and empowering women

4.38

Providing access to new technology

4.65

There were few differences in how men and women, urban and rural dwellers, employed and unemployed adults, or different age and education cohorts ranked the goals. 61 Rankings did vary across countries and regions, but reducing hunger and poverty were the top two goals for all but 6 of the 26 countries polled. Of these six, four were Southern African countries where HIV prevalence is very high; all four ranked 'Reducing the spread of HIV' as their top priority. Kenya and Uganda also ranked this goal in their top two. Larger differences between countries were seen in rankings of lower priority goals. 62

Sources

Awasthi, Shally , D. A. P. Bundy, and Lorenzo Savioli. 2003. Helminthic infections. British Medical Journal 327: 431-433.

Banerjee, Abhijit, and Esther Duflo. 2006. The economic lives of the poor (PDF).

Banerjee, Abhijit, and Esther Duflo. 2007. What is middle class about the middle classes around the world? (PDF).

Black, Robert E., et al. 2008. Maternal and child undernutrition: Global and regional exposures and health consequences. Lancet 371: 243-60.

Centers for Disease Control and Prevention. Malaria: Disease. http://www.cdc.gov/malaria/about/disease.html (accessed April 27, 2010). Archived by WebCite® at http://www.webcitation.org/5pIz0gCDp.

Collins, Daryl, et al. 2009. Portfolios of the poor: How the world's poor live on &dollar;2 a day. Princeton, NJ: Princeton University Press. Selections at http://books.google.com/books?id=KE0H8B7NBNYC&lpg=PP1&dq=portfolios%20of... (accessed April 29, 2010).

de Silva, Nilanthi R., et al. 2003. Soil-transmitted helminth infections: Updating the global picture. Trends in Parasitology 19: 547-551.

Deaton, Angus. 2008. Income, health, and well-being around the world: Evidence from the Gallup World Poll (PDF). Washington, DC: Gallup.

Edwin, Michael. 2000. The population dynamics and epidemiology of lymphatic filariasis. In Lymphatic filariasis, ed. Thomas B. Nutman, 41-81. London: Imperial College Press.

Food and Agriculture Organization of the United Nations. Glossary (list). http://faostat.fao.org/site/375/default.aspx (accessed June 10, 2010). Archived by WebCite® at http://www.webcitation.org/5qNmnFEfJ.

GiveWell. Mortality by income group with calculations (XLS).

Global Network for Neglected Tropical Diseases. 2009. Trachoma (PDF).

Jamison, Dean T., et al., eds. 2006. Disease control priorities in developing countries (PDF). 2nd ed. New York: Oxford University Press.

Kumaraswami, V. 2000. The clinical manifestations of lymphatic filariasis. In Lymphatic filariasis, ed. Thomas B. Nutman, 103-125. London: Imperial College Press.

Lopez, Alan D., et al., eds. 2006. Table 3B.7: Deaths by cause, sex, and age in the Sub-Saharan Africa region, 2001 (thousands). In Global burden of disease and risk factors. New York: Oxford University Press. http://www.dcp2.org/pubs/GBD/3/Table/3.B7 (accessed April 27, 2010). Archived by WebCite® at http://www.webcitation.org/5pIf0sYLp.

Lopez, Alan D., et al., eds. 2006. Table 3B.8: Deaths by cause, sex, and age in high-income countries, 2001 (thousands). In Global burden of disease and risk factors. New York: Oxford University Press. http://www.dcp2.org/pubs/GBD/3/Table/3.B8 (accessed April 27, 2010). Archived by WebCite® at http://www.webcitation.org/5pIf1qxjx.

Mathers, Colin D., Majid Ezzati, and Alan D. Lopez. 2007. Measuring the burden of neglected tropical diseases: The global burden of disease framework (PDF). PLoS Neglected Tropical Diseases 1, no. 2.

Müller, Olaf, and Michael Krawinkel. 2005. Malnutrition and health in developing countries (PDF). Canadian Medical Association Journal 173: 279-286.

Olds, Richard G. 1998. Infections caused by helminths. In Internal medicine. 5th ed. Ed. Jay H. Stein, 1696-1706. St. Louis: Mosby.

Simonsen, Paul E. 2009. Filariases. In Manson's tropical diseases. 22nd ed. Ed. Gordon C. Cook and Alimuddin I. Zumla, 1477-1513. London: Saunders.

Tortora, Robert D. 2009. Sub-Saharan Africans rank the Millennium Development Goals (MDGs) (PDF). Washington, DC: Gallup.

UNAIDS. 2007. AIDS epidemic update (PDF).

World Bank. 2006. World Development Indicators 2006. Washington, DC: World Bank.

World Bank. 2008. Poverty data: A supplement to World Development Indicators 2008 (PDF). Washington, DC: World Bank.

World Bank. Country and lending groups: Low income economies. http://data.worldbank.org/about/country-classifications/country-and-lend... (accessed May 26, 2010). Archived by WebCite® at http://www.webcitation.org/5pHSuWN38.

World Health Organization. Disease and injury regional estimates for 2004: Deaths for World Bank income groups (XLS).

World Health Organization. Disease and injury regional estimates for 2004: Prevalence for World Bank income groups (XLS).

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Standard of Living in the Developing World | GiveWell

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This page surveys information about quality of life in the developing world. The purpose is primarily to answer the question, "If a donor's funds save a live, what sort of life is saved?" We make no attempt to fully convey what life is like; instead, we focus on what facts are available from relatively broad, large-sample, plausibly representative studies.

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Joey Huderle

# data[].attributes.body
Joey Huderle

# data[].attributes.headline
Government is destroying our standard of living

# data[].attributes.subject
Government is destroying our standard of living

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Autumn Wagner

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Finally, the change in net worth has made the mainstream media. The statistics, as reported in the NY Times, are horrific, as are the implications for the future of the country.

Net worth may be the best single measure of a country's well-being. Median net worth is a reasonable marker for the standard of living. Medians (or averages) are not good measures to capture what is happening at the lowest or highest ends. (More about that below.)

In the simplest terms, net worth is the value of a person's assets minus his liabilities. If this measure is growing, a person is becoming better off. If it is shrinking then that person is becoming worse off, at least in terms of wealth.

Conditions economically (and politically) may be getting so indefensible that even the NY Times feels compelled to report them, in this article by Anna Bernasek, which reported:

She does not go out of her way to shield the Obama Administration:

She also noted:

This report is damaging to any notion that there has been an economic recovery or that economic matters are back to normal.

The Russell Sage Foundation financed the original study. I think it is fair to say that this foundation is left of center, although that doesn't imply the research is tainted. Their focus is more oriented to highlighting the effect on income inequality. This graph shows the effects on various percentiles of the population since 1984:

All percentiles show declines since 2007. The declines are greater the lower the percentile group. This graph captures the concern over increasing economic inequality. While these divergences are important, there is a more important point to be made -- America is becoming poorer.

The U.S. is getting poorer and has been doing so over a sustained period. That is a first in the history of this country, and it has all kinds of dire consequences, including an inability to continue funding the level of welfare currently promised. Unless this trend can be reversed, there is little point in talking about income inequality, at least in terms of taking more from the doers and providing it to the less well-off. Atlas Shrugged showed where that leads.

The Great Recession had a serious impact on all percentiles in the graph above. All are down from 2007. Liberals want to focus on how much better the "rich" are doing versus how poorly the "poor" are doing. The implication is that the rich are getting richer at the expense of the poor. This ideological nonsense is politically convenient and diversionary. There is no fixed pie where someone who gets a larger piece does so at the expense of someone receiving a smaller piece. That is only possible where government determines who the winners are.

The mindset of the loony left is that those at the bottom are not getting their fair share. The reality is that the government dole has locked them into this position. Ben Franklin recognized the corrosive effects more than two centuries ago:

Human nature has not changed since Old Ben made his observation. What has changed is the ability of politicians to buy votes with taxpayer money. The poor are merely collateral damage in the quest for office and greater power.

The distribution at the top is not independent of government. The more government controls the economy, the more important it is to "have a friend in government." It used to be what you knew enabled you to succeed. Today, it is increasingly who you know. Crony capitalism (there is no such thing, but there is "crony government") adds to whatever differences in income distributions are due to ability, occupation, luck, risk-taking and motivation.

Anyone who believes that government helps the poor need only look at the effects on the 25th percentile. Even before the Great Recession hit, this group was the only one failing to keep up. This result should not be interpreted as the need for more help, but the need to re-examine the entire structure of the Welfare State.

Were the economy and its components growing at a real rate of 2 - 3%, then median net worth presumably would be growing at a similar rate. Let's do some quick arithmetic based on the graph above. According to the report, median net worth in 2003 was $88,000. From the graph, it is approximately 25% higher than it was in 1984. That would mean that median net worth in 1984 was approximately 88,000/1.25 or $70,400. Compounding that forward 29 years would produce what one might expect the median net worth to be at the end of 2013. At 2% that number would be $137,500; at 3%, $182,400. Instead, it is only $56,300.

Based on these quick calculations, American's median net worth has been reduced by 60% to 70% from what might have been expected. How is this possible?

There are several reasons. I would argue that most of the blame goes to government:

Government is taking a much bigger share of the economy.

Government understates inflation which results in an overstatement of real GDP.

Taxes are higher, especially on capital gains which are unadjusted for inflation and taxed as if they were true gains.

Government interventions have destroyed the economy's ability to grow.

Government transfer payments have reduced the workforce, spreading a reduced output over more people.

Government's encouragement of the use of debt has created behavior not in the best interests of unsophisticated citizens.

There are other reasons, some that are not related to government although I suspect they have minimal effect. Regardless, the fact is that the U.S. is becoming poorer by the day. For much of this period, people maintained their spending levels by borrowing or consuming capital. The good times of the last twenty years were nowhere near as good as we pretended they were. Now we must pay the piper and hope that government can be reduced back to an affordable level of spending and regulation.

Economists, particularly at the Federal Reserve, are fond of saying their models no longer work. That is one of the most disingenuous statements ever made by the economics profession. Unfortunately this profession has the same integrity as their masters, the politicians, who basically bought them lock, stock, and barrel.

There is nothing new in economics. The fundamentals of human behavior have not changed. Econometric models evolved to describe history. They were deliberately correlated with outcomes. That was the measure of a "good" model, how well it fit the data. But the economy is not some large production machine that can be manipulated by altering inputs. The economy is millions and millions of individual decision-makers who respond directly to incentives and disincentives. These have nothing to do with the aggregate variables that government focuses on.

If individual incentives and disincentives remain reasonably constant, the aggregates tend to remain in relationship with each other. Once you begin changing incentives at the micro-economic level, then behavior changes and the correlations are altered. The model no longer describes reality.

The fallacies of macroeconomics were known and rejected long before John Maynard Keynes was born. His contributions were nothing new. What gained them credibility was the desperation of the political class to do something that might end the Great Depression.

Adopting something on such a basis is not rational. It is the same desperation exhibited by those looking for a cure for a terminal disease. They believe in quacks out of desperation.

Ludwig von Mises warned about the destructive policies that got us to this point. Here are a few pertinent quotes:

The political class always despised economists because they recognized and criticized their political fantasies. The description "dismal science" came from their realistic approach to political dreams. Now that the political class has coopted the economics profession to the point where bribery can get them whatever opinion they want, they use economists to further these political fantasies. Any economist dependent on the government cannot be an honest man without risking his livelihood.

Unfortunately reality is not optional, and the last quotation of Mises above describes the current economic condition. Matters will worsen from here.

Finally, the change in net worth has made the mainstream media. The statistics, as reported in the NY Times, are horrific, as are the implications for the future of the country.

Net worth may be the best single measure of a country's well-being. Median net worth is a reasonable marker for the standard of living. Medians (or averages) are not good measures to capture what is happening at the lowest or highest ends. (More about that below.)

In the simplest terms, net worth is the value of a person's assets minus his liabilities. If this measure is growing, a person is becoming better off. If it is shrinking then that person is becoming worse off, at least in terms of wealth.

Conditions economically (and politically) may be getting so indefensible that even the NY Times feels compelled to report them, in this article by Anna Bernasek, which reported:

She does not go out of her way to shield the Obama Administration:

She also noted:

This report is damaging to any notion that there has been an economic recovery or that economic matters are back to normal.

The Russell Sage Foundation financed the original study. I think it is fair to say that this foundation is left of center, although that doesn't imply the research is tainted. Their focus is more oriented to highlighting the effect on income inequality. This graph shows the effects on various percentiles of the population since 1984:

All percentiles show declines since 2007. The declines are greater the lower the percentile group. This graph captures the concern over increasing economic inequality. While these divergences are important, there is a more important point to be made -- America is becoming poorer.

The U.S. is getting poorer and has been doing so over a sustained period. That is a first in the history of this country, and it has all kinds of dire consequences, including an inability to continue funding the level of welfare currently promised. Unless this trend can be reversed, there is little point in talking about income inequality, at least in terms of taking more from the doers and providing it to the less well-off. Atlas Shrugged showed where that leads.

The Great Recession had a serious impact on all percentiles in the graph above. All are down from 2007. Liberals want to focus on how much better the "rich" are doing versus how poorly the "poor" are doing. The implication is that the rich are getting richer at the expense of the poor. This ideological nonsense is politically convenient and diversionary. There is no fixed pie where someone who gets a larger piece does so at the expense of someone receiving a smaller piece. That is only possible where government determines who the winners are.

The mindset of the loony left is that those at the bottom are not getting their fair share. The reality is that the government dole has locked them into this position. Ben Franklin recognized the corrosive effects more than two centuries ago:

Human nature has not changed since Old Ben made his observation. What has changed is the ability of politicians to buy votes with taxpayer money. The poor are merely collateral damage in the quest for office and greater power.

The distribution at the top is not independent of government. The more government controls the economy, the more important it is to "have a friend in government." It used to be what you knew enabled you to succeed. Today, it is increasingly who you know. Crony capitalism (there is no such thing, but there is "crony government") adds to whatever differences in income distributions are due to ability, occupation, luck, risk-taking and motivation.

Anyone who believes that government helps the poor need only look at the effects on the 25th percentile. Even before the Great Recession hit, this group was the only one failing to keep up. This result should not be interpreted as the need for more help, but the need to re-examine the entire structure of the Welfare State.

Were the economy and its components growing at a real rate of 2 - 3%, then median net worth presumably would be growing at a similar rate. Let's do some quick arithmetic based on the graph above. According to the report, median net worth in 2003 was $88,000. From the graph, it is approximately 25% higher than it was in 1984. That would mean that median net worth in 1984 was approximately 88,000/1.25 or $70,400. Compounding that forward 29 years would produce what one might expect the median net worth to be at the end of 2013. At 2% that number would be $137,500; at 3%, $182,400. Instead, it is only $56,300.

Based on these quick calculations, American's median net worth has been reduced by 60% to 70% from what might have been expected. How is this possible?

There are several reasons. I would argue that most of the blame goes to government:

Government is taking a much bigger share of the economy.

Government understates inflation which results in an overstatement of real GDP.

Taxes are higher, especially on capital gains which are unadjusted for inflation and taxed as if they were true gains.

Government interventions have destroyed the economy's ability to grow.

Government transfer payments have reduced the workforce, spreading a reduced output over more people.

Government's encouragement of the use of debt has created behavior not in the best interests of unsophisticated citizens.

There are other reasons, some that are not related to government although I suspect they have minimal effect. Regardless, the fact is that the U.S. is becoming poorer by the day. For much of this period, people maintained their spending levels by borrowing or consuming capital. The good times of the last twenty years were nowhere near as good as we pretended they were. Now we must pay the piper and hope that government can be reduced back to an affordable level of spending and regulation.

Economists, particularly at the Federal Reserve, are fond of saying their models no longer work. That is one of the most disingenuous statements ever made by the economics profession. Unfortunately this profession has the same integrity as their masters, the politicians, who basically bought them lock, stock, and barrel.

There is nothing new in economics. The fundamentals of human behavior have not changed. Econometric models evolved to describe history. They were deliberately correlated with outcomes. That was the measure of a "good" model, how well it fit the data. But the economy is not some large production machine that can be manipulated by altering inputs. The economy is millions and millions of individual decision-makers who respond directly to incentives and disincentives. These have nothing to do with the aggregate variables that government focuses on.

If individual incentives and disincentives remain reasonably constant, the aggregates tend to remain in relationship with each other. Once you begin changing incentives at the micro-economic level, then behavior changes and the correlations are altered. The model no longer describes reality.

The fallacies of macroeconomics were known and rejected long before John Maynard Keynes was born. His contributions were nothing new. What gained them credibility was the desperation of the political class to do something that might end the Great Depression.

Adopting something on such a basis is not rational. It is the same desperation exhibited by those looking for a cure for a terminal disease. They believe in quacks out of desperation.

Ludwig von Mises warned about the destructive policies that got us to this point. Here are a few pertinent quotes:

The political class always despised economists because they recognized and criticized their political fantasies. The description "dismal science" came from their realistic approach to political dreams. Now that the political class has coopted the economics profession to the point where bribery can get them whatever opinion they want, they use economists to further these political fantasies. Any economist dependent on the government cannot be an honest man without risking his livelihood.

Unfortunately reality is not optional, and the last quotation of Mises above describes the current economic condition. Matters will worsen from here.

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Government Is Destroying our Standard of Living

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Finally, the change in net worth has made the mainstream media. The statistics, as reported in the NY Times, are horrific, as are the implications for the future of the country. Net worth may be the best single measure of a country's well-being. Median net worth is a reasonable marker for the standard of living.

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Joey Huderle

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The literacy rate is usually a good indicator of a country's standard of living. However, it shouldn't be the only factor we look at when determining how rich or poor a country might be. Watch this video for some more standard of living indicators!

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A long, steep drop for Americans standard of living

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A long, steep drop for Americans standard of living

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Autumn Wagner

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Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession - even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and "Occupy Wall Street" and who may take out their frustrations on incumbent politicians in next year's election.

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth - think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people's buying power by 3.25 percent since mid-2008.

"In a dynamic economy, one would expect Americans' disposable income to be growing, but it has flattened out at a low level," says economist Bob Brusca of Fact & Opinion Economics in New York.

To be sure, the recession has hit unevenly, with lower-skilled and less-educated Americans feeling the pinch the most, says Mark Zandi, chief economist for Moody's Economy.com based in West Chester, Pa. Many found their jobs gone for good as companies moved production offshore or bought equipment that replaced manpower.

"The pace of change has been incredibly rapid and incredibly tough on the less educated," says Mr. Zandi, who calls this period the most difficult for American households since the 1930s. "If you don't have the education and you don't have the right skills, then you are getting creamed."

Per capita disposal personal income - a key indicator of the standard of living - peaked in the spring of 2008, at $33,794 (measured as after-tax income). As of the second quarter of 2011, it was $32,479 - almost a 4 percent drop. If per capita disposable income had continued to grow at its normal pace, it would have been more than $34,000 a year by now.

The so-called misery index, another measure of economic well-being of American households, echoes the finding on the slipping standard of living. The index, a combination of the unemployment rate and inflation, is now at its highest point since 1983, when the US economy was recovering from a short recession and from the energy price spikes after the Iranian revolution.

In Royal Oak, Mich., Adam Kowal knows exactly how the squeeze feels. After losing a warehouse job in Lansing, he, his wife, and their two children have had little recourse but to move in with his mother. Now working at a school cafeteria, Mr. Kowal earns 28 percent less than at his last job.

He and his wife now eat out once a month instead of once a week, do no socializing, and eat less expensive foods, such as ground chuck instead of ground sirloin. "My mom was hoping her kids would lead a better life than her, but so far that has not happened," says Kowal.

With disposable incomes falling, perhaps it's not surprising that 64 percent of Americans worry that they won't be able to pay their families' expenses at least some of the time, according to a survey completed in mid-September by the Marist Institute for Public Opinion. Among those, one-third say their financial problems are chronic.

"What we see is that very few are escaping the crunch," says Lee Miringoff, director of the Marist Institute in Poughkeepsie, N.Y.

Income loss is hitting the middle class hard, especially in communities where manufacturing facilities have closed. When those jobs are gone, many workers have ended up in service-sector jobs that pay less.

"Maybe it's the evolution of the economy, but it appears large segments of the workforce have moved permanently into lower-paying positions," says Joel Naroff of Naroff Economic Advisors in Holland, Pa. "The economy can't grow at 4 percent per year when the middle class becomes the lower middle class."

He would get no argument from Jeff Beatty of Richmond, Ky., who worked in the IT and telecommunications businesses for most of his career - until he hit a rough patch. He and his wife are living on his unemployment insurance benefits (which will run out in months), his early Social Security payments, and her disability payments from the Social Security Administration. Their total income comes to $30,000 a year.

"Our standard of living has probably declined threefold," he says.

Mr. Beatty, who used to make a comfortable income, now anticipates applying for food stamps. He and his wife have sold much of their furniture, which they no longer need because they have moved into a one-bedroom apartment owned by his sister-in-law.

Even people with college degrees are feeling the squeeze. On a fall day, Hunter College graduate and Brooklyn resident Paul Battis came to lower Manhattan to check out the Occupy Wall Street protest. He tells one of the protesters that America's problem is the various free-trade pacts it has approved.

Mr. Battis's angst over trade is rooted in the fact that two years ago he lost his data-entry job with a Wall Street firm that decided to outsource such jobs to India.

When he had the job, he made a comfortable income. Now his income is sporadic, from the occasional construction job he lands. He used to buy clothing from Macy's or other department stores. Now he goes to Goodwill or Salvation Army stores. He has even cut back on taking the city subways, instead riding his bicycle. Separated from his wife and his 15-year-old daughter, he says, "Try making child support payments when you don't have a regular income. I'm constantly catching up."

Even recently some Americans could tap the equity in their homes or their stock market accounts to make up for any shortfalls in income. Not anymore. Since 2007, Americans' collective net worth has fallen about $5.5 trillion, or more than 8.6 percent, according to the Federal Reserve.

The bulk of that decline is in real estate, which has lost $4.7 trillion in value, or 22 percent, since 2007. In Arizona, for example, more than half of homeowners live in houses that are worth less than their purchase prices, according to some reports.

Stock investments aren't any better. Since 1999, the Standard & Poor's index, on a price basis, is off 17 percent. It's up 3.2 percent when dividends are included, but that's a small return for that length of time.

"This is really a lost decade of affluence," says Sam Stovall, chief investment strategist at Standard & Poor's in New York.

Among those who have watched their finances deteriorate are senior citizens.

"Given the stock market, they are very nervous," says Nancy LeaMond, executive vice president at AARP, the seniors' lobbying group. "They want to keep their savings."

But Ms. LeaMond also notes that about 2 in every 3 seniors are dependent not on Wall Street but on Social Security. The average annual income for those over 65 is $18,500 a year - almost all of it from Social Security, she says. "This is not a part of America that is rich," she says.

At the same time, seniors are getting pinched in their pocketbooks.

"Our members are watching all the things they have to buy, especially health-care products, go up in price," says LeaMond.

In Pompano, Fla., some stretched seniors end up at the Blessings Food Pantry, which is associated with Christ Church United Methodist.

"We have quite a few grandparents who are raising their grandchildren on a fixed income, feeding them and buying clothes for them when they can't afford to do [that for] themselves," says Yvonne Womack, the team leader.

Others, she says, are forgoing food to pay for their medical prescriptions. "And then there is your ordinary senior whose Social Security [check] has not gone up in the last several years, but food and gasoline [prices] have skyrocketed," she says. (However, Social Security checks will go up 3.6 percent in January.) The Blessings, she notes, is now feeding 42 percent more people than last year. "We also provide food you can eat out of a can," she says. "We do have seniors who are living on the streets."
Researcher Geoff Johnson contributed to this report.

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A Long, Steep Drop for Americans' Standard of Living

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Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

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Elizabeth Zimmerman

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Both terms incorporate a degree of subjectivity. But in general, they relate to slightly distinct concepts:

If you are contented and happy and live free from fear or stress, you may be said to enjoy a high quality of life.

But if you are rich, can afford good health care and education and good food and accommodation (or alternatively if you aren't rich but enjoy all these things because of social redistribution of wealth) then you have a high standard of living.

A person may have a low standard of living (relative poverty compared to the people around them or compared to people geographically removed from them) but a very high quality of life (they may report happiness, fulfilment and satisfaction in life). So the two may go hand-in-hand but needn't.

Articulating what is meant by the terms and attempting to measure them are two different things, though!

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What's the difference between standard of living and quality of life?

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Answer: Both terms incorporate a degree of subjectivity. But in general, they relate to slightly distinct concepts: If you are contented and happy and live free from fear or stress, you may be said to enjoy a high quality of life. But if you are rich, can afford good health care and education ...

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Autumn wagner

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Standard of living and quality of life are often referred to in discussions about the economic and social well-being of countries and their residents, but what is the difference between the two? The definitions of these terms may overlap in some areas, depending on whom you ask. It's more than just a matter of semantics; in fact, knowing the difference can affect how you evaluate a country where you might be looking to invest some money.
Tutorial: Economic Indicators to Know
Standard of Living

Standard of living generally refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class, in a certain geographic area. An evaluation of standard of living commonly includes the following factors:

When you think about standard of living, you can think about things that are easy to quantify. We can measure factors like life expectancy, inflation rate and the average number of paid vacation days workers receive each year, for example.

Standard of living is often used to compare geographic areas, such as the standard of living in the United States versus Canada, or the standard of living in Milwaukee versus New York City. If you live in a particular country, a certain number of vacation days per year will be the norm. In the United States, it's 10 to 20 days while in Denmark it's 31. Some companies within each country may be more or less generous, but one practice prevails.

Standard of living can also be used to compare distinct points in time. For example, compared to a century ago, the standard of living in the U.S. is considered to have improved greatly; the same amount of work buys a larger quantity of goods, and items that were once luxuries, such as refrigerators and automobiles, are now widely available. Also, leisure time and life expectancy have increased and annual hours worked has decreased.

One measure of standard of living is the Human Development Index (HDI), developed in 1990 by the United Nations. It considers life expectancy at birth, adult literacy rates and per capita gross domestic product (GDP) to measure a country's level of development. (For related reading, see What is GDP and why is it so important?)

Quality of Life

Quality of life is more subjective and intangible. The United Nations' Universal Declaration of Human Rights, adopted in 1948, provides an excellent list of factors that can be considered in evaluating quality of life. It includes many things that citizens of the United States and other developed countries take for granted, but that are not available in a significant number of countries around the world. Although this declaration is 60 years old, in many ways it still represents an ideal to be achieved, rather than a baseline state of affairs. Factors that may be used to measure quality of life include the following:

freedom from slavery and torture

equal protection of the law

freedom from discrimination

freedom of movement

freedom of residence within one's home country

presumption of innocence unless proved guilty

right to marry

right to have a family

right to be treated equally without regard to gender, race, language, religion, political beliefs, nationality, socioeconomic status and more

right to privacy

freedom of thought

freedom of religion

free choice of employment

right to fair pay

equal pay for equal work

right to vote

right to rest and leisure

right to education

right to human dignity

Comparing the Two

When people think about their own standard of living, the amount of money they bring in might be the first thing that comes to mind. If their income decreases, through job loss, for example, they might consider their standard of living to be decreasing along with it, however is this the case? If you consider the other factors that make up standard of living, then chances are your overall standard of living is still quite good, despite your present lack of income. For example, if you have a good chance of securing another quality job, your country's economy is generally strong, you still have access to health care, and if the cost of goods and services is reasonable enough that you can more or less get by in the meantime, until you find a new job, then you're doing all right. (To reduce health care expenditures, read Fighting The High Costs Of Health Care and 20 Ways To Save On Medical Bills.)

Standard of living is somewhat of a flawed indicator, however. Looking at our earlier list, while the United States, for example, might be considered to rank highly in all of these areas, most people would agree that for some segments of the population, the standard of living in the United States is actually quite low. In East St. Louis, Ill., for example, the quality and availability of employment has historically been poor; environmental quality is below average for the U.S., the incidence of disease is high and life expectancy is also below average.

Similar to the standard of living, what would be considered a good quality of life by one person, may not be considered as such by another. The earlier list of quality of life factors might also be considered to be a list of things the United States offers. "The Economist", for example, produces an index that attempts to rate the quality of life in various countries. Predictably, developed nations like Norway, Australia and Luxembourg come out on top and less-developed countries like Iraq, Afghanistan and Sudan come out on the bottom, according to "The Economist's" quality-of-life index. That said, there are certainly segments of the population, in countries like the United States, in which people don't have the right to marry whomever they choose, are discriminated against, are treated as guilty until proven innocent, do not have access to a meaningful and useful education and/or do not get equal pay for equal work.

The Bottom Line

The main difference between standard of living and quality of life is that the former is more objective, while the latter is more subjective. Standard of living factors such as gross domestic product, poverty rate and environmental quality, can all be measured and defined with numbers, while quality of life factors like equal protection of the law, freedom from discrimination and freedom of religion, are more difficult to measure and are particularly qualitative. Both indicators are flawed, but they can help us get a general picture of what life is like in a particular location at a particular time.

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Standard of living and quality of life are often referred to in discussions about the economic and social well-being of countries and their residents, but what is the difference between the two? The definitions of these terms may overlap in some areas, depending on whom you ask.

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Elizabeth Zimmerman

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Joey Huderle

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Benefits of Marketing & Productivity on Standard of Living

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We have all heard that countries strive to raise their country's Standards of Living. What exactly does Standard of Living measure and does it really improve with greater economic growth?

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Elizabeth Zimmerman

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Elizabeth Zimmerman

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Which countries have the highest standard of living? Standard of living refers to the rank of getting pleasure for everyday life in luxury and extravagance by an individual or a society. There are certain factors to consider supporting the rankings to find out the answer. Highest standard of living can be measured thru the country's level of safety, standard of education (where knowledge as measured by the adult literacy rate and the gross enrolment ratio of the combined primary, secondary and tertiary students), economic situation, life contentment and/or expectancy at birth (wherein a long and healthy life is measured) and household income to name a few.

As mentioned before in our article about the countries with the best quality of life, one of the important indicators to help evaluate the welfare of an individual or people in a country is to know their condition and worth of life. In this list where we are going to find out the top 11 countries with the highest standard of living, we are going to measure the income and the poverty rate of the people. We are also going to assess the quality of the life and other cultural and social aspects of the country. A decent standard of living is also measured by the GDP (Gross Domestic Product) of the country wherein the value of all goods and services produces in the economy is divided by the population.
Wouldn't be great to find out which of these countries have the highest standard of living...who knows maybe one day we could visit and experience an excellent chance at a blissful life.

Now let's check out how they ranked accordingly to the HDI (Human Development Index), a methodology used to compare and measure the different factors that will describe a country if it is a developing or developed nation. Last July 24, 2014, the latest report on HDI was launched in Tokyo wherein 30% of the world's population have high human development account. Only 18% of the population falls in the low human development category.

So, let's check out the list, beginning with:

11. Norway

With more than 5 million populations, it pulls towards its beautiful countryside a lot of tourists that seek fun and entertainment thru the popular Norway Cruise. HDI is 0.943; Literacy is 100% where English is widely spoken. Popular with agricultural products like Barley, wheat and potatoes. Natural resources are petroleum, copper and hydropower. Export and import came from mining, shipbuilding, paper products, metals and chemicals industries.

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11 Countries with Highest Standard of Living

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Which countries have the highest standard of living? Standard of living refers to the rank of getting pleasure for everyday life in luxury and extravagance by an individual or a society. There are certain factors to consider supporting the rankings to find out the answer.

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Elizabeth Zimmerman