More consumption is one part of a better life.
Material living standards concern the goods and services people can consume, including their quality. Non-material living standards include health, leisure, safety and environmental quality. The categories overlap: medical services are consumption, while better health is an outcome. Explain the route from economic performance to people's lives; a bigger economy is not itself proof that everyone is better off.
- Living standards
- Material living standards concern the quantity and quality of goods and services people can consume. Non-material living standards include health, leisure, safety and environmental quality.
- Income and purchasing power
- Disposable income is household income after subtracting direct taxes and adding cash transfers. Real disposable income adjusts it for prices. A rise means greater purchasing power: more goods and services the income can buy.
- Watch for this
- Higher income alone does not settle overall wellbeing. Weigh the consumption gain against changes in health, time and the environment.
Worked example: Higher income, less time
A worker can buy more goods after taking a better-paid job, but now works six extra hours each week and has a longer commute.
- Higher purchasing power can improve access to food, housing and other consumption.
- Longer working and travel time reduce time available for rest and family.
- Whether overall living standards improve depends on the size and value of both changes.
Watch out for this
Higher income means living standards must improve.
Income creates opportunities to consume; it does not measure every benefit or cost of the way that income is earned.
Check your understanding
Which evidence most directly challenges a claim that higher real income guarantees better overall living standards?
- Workers have less leisure and poorer health.
- The country uses a different currency.
- The income figures are expressed per person.