To determine the level of a country’s welfare, general indicators of economic development are used, which can also be used to determine the standard of living of the population. These indicators include the gross domestic product (GDP), national income, and net national disposable income. The volume of GDP in the economy is most often used as the result of the economic activity of the country. In addition, it reflects the market value of all final goods and services produced in a year. To characterize the “standard of living” and analyze its dynamics, the GDP indicator is calculated in constant prices per capita.
One of the significant shortcomings is that the indicator of the volume of GDP includes components that are not related to determining the standard of living of the population. For example, the cost of maintaining the army, the state apparatus, and other. In addition, GDP does not consider in its composition any types of economic activity that affect the standard of living of the population, and the level of functioning of the country’s economy.
This is because the gross domestic product indicator is geared towards a market that some activities, such as being a housewife or repairing one’s own house, do not pass through. Moreover, the measurement of GDP does not examine such things as changes in the structure and quality of products and fair or unfair distribution of wealth among the population. All these indicators strongly affect the standard of living of the population of the country.
The OECD Better Life Index is a comprehensive study by the Organization for Economic Co-operation and Development (OECD) that measures the achievements of the world’s countries in terms of the well-being of their populations. It included 11 dimensions of well-being: “Housing conditions”, “Income”, “Work”, “Society”, “Education”, “Environment”, “Civil rights”, “Health”, “Satisfaction”, “Safety”, and “Work/Recreation”. Each dimension is analyzed based on one or more indicators. The measurement “Work/Rest” is calculated based on such indicators as the number of employees who regularly work overtime; the share of working mothers; the amount of leisure time for the population.
One of the goals of the Better Life Index is to engage and get feedback from as many people as possible to signal to governments where to focus their efforts to improve the quality of life. The index of each country is determined by calculating the weighted average of the indicated indicators, each of which is defined as the basis of well-being. The indicators are based on statistical analysis and sociological research conducted regularly. According to the authors of the project, these indicators effectively reflect the idea of well-being, especially in the context of comparing results across countries. Thus, while the OECD framework embraces dimensions of well-being that are universal and essential to all people, it can also be complemented by similar national initiatives. In addition, in the future indicators reflecting current living conditions and quality of life will be complemented by indicators reflecting the sustainability of well-being over time.