Standard of Living

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Standard of Living

What It Means

A standard of living is the level of material comfort, or quality of life, enjoyed by an individual or group. Factors that determine a standard of living include income, physical health, quality of the environment, housing availability, life expectancy, personal safety, and access to education, medical facilities, and social services. In economics standard-of-living measurements are typically used to gauge the level of material comfort attained by entire nations. These evaluations of the overall population do, however, take into consideration the standard of living of the individual (by measuring factors such as average incomes and life expectancies).

Opinions vary widely as to which factors are most important for measuring standards of living. Some experts determine a nation’s standard of living by monitoring the per capita income (the average amount of money an individual earns) of the general population, while others measure levels of consumption, or the average amount of goods and services purchased by consumers. Other analysts pay closer attention to factors not directly related to economic forces. For example, some experts examine how government affects standard of living through programs and subsidies (a type of financial assistance) designed to raise the quality of life.

When Did It Begin

Although human beings have probably always pondered questions of material comfort when evaluating the quality of their lives, the modern concept of a standard of living as a measure of a society’s health dates to the Enlightenment in Europe. The Enlightenment was a period of intellectual and scientific progress in the seventeenth and eighteenth centuries, during which philosophers and scientists attempted to explain human existence through reason and science instead of religion. Enlightenment thinkers developed the idea that nations could improve the quality of life of most of their citizens by improving government and social institutions so that they functioned according to rational principles.

The notion of an improved quality of life for society in general later informed the American Declaration of Independence (1776), which guaranteed all citizens a right to the “pursuit of happiness.” This concept of happiness was generally understood to mean the freedom to pursue economic prosperity. Indeed, by the 1840s the United States was one of the most economically powerful nations in the world, offering a higher standard of living for the individual than had existed at any other time in history.

More Detailed Information

Determining the standard of living of a nation as a whole is an inexact process. For the sake of simplicity, many economists focus solely on economic factors. One common criterion for measuring standard of living is per capita income (the average amount earned per person). A higher per capita income generally leads to increases in the amount of goods consumers can purchase, increases in access to quality health care, and increases in life expectancy, all of which are important factors in determining an individual’s standard of living. By measuring per capita income, these economists reason, one can make an informed estimation of a country’s overall standard of living.

In the final analysis, however, using per capita income to gauge a country’s standard of living can be misleading. For one, per capita income does not account for increases in the cost of living (the cost of basic necessities, such as food, clothing, and housing). If a nation’s average cost of living increases at a higher rate than its per capita income, then standards of living might in fact be declining because people are spending more to live but not earning enough money to cover these increases. Furthermore, per capita income measurements neglect questions of how income is distributed among a country’s citizens. In some instances a nation’s per capita income rises because the income of the wealthiest sector of the population has grown at an extremely high rate, while the income of the poorest sector has remained stagnant. In other words, a nation with an increased per capita income may have also reached a higher overall standard of living, but the total number of individuals enjoying an acceptable standard of living may have actually declined.

At the same time, determining standards of living according to per capita income, or any other economic measurement, necessarily ignores other aspects of material comfort that are not determined by economic forces, such as environmental quality. These factors are controlled by government policy rather than the economy, and so they are not reflected in a nation’s per capita income.

Recent Trends

Over the course of the twentieth century, the overall standard of living in the United States rose dramatically. This improvement was largely a result of the increase in poor Americans’ standard of living, compared to increases in the standard of living of the richest segment of the population. At the beginning of the century, the income gap between the nation’s wealthiest and poorest citizens was extreme (the total wealth of the richest 5 percent of Americans was eight times greater than that of the remaining 95 percent of the population); by the 1970s this gap had shrunk considerably (the richest 5 percent had five times the wealth of the bottom 95 percent).

In the 1980s, however, the discrepancy between the standards of living of the wealthiest and the poorest Americans began to grow again. The principle causes of this gap included weaker labor laws (which had traditionally safeguarded the legal rights of workers), relatively large pay increases for those with college degrees, and systematic cuts in government social programs such as welfare (financial assistance to poor Americans) and Medicaid (government-subsidized medical care).

Standard of Living

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Standard of living refers to the level of material well-being enjoyed by an individual or group. The standard of living is generally measured by the collective cost of goods and services that is considered to represent the essential consumption of any society's members. By some measures, the standard of living will also include certain publicly provided services, such as education, health services, transportation, and intangible quality of life factors like clean water and air, and cultural and leisure activities.

The term standard of living may also refer to the goals that individuals or groups obtain for themselves as consumers in terms of services, housing, furnishings, or automobiles. In the United States during the 1960s, the United States government's definition of poverty was developed as a variant of the general concept of the standard of living in the country. In 1996, for example, the average poverty line for a four-person family was a little over $16,000. The indexes used to measure poverty and create specific dollar amounts to define poverty are based on arguably variable statistics, but the fact that a poverty index has been established bears witness that U.S. society appears to recognize what seems to be a baseline financial standard of living and is able to approximate those who are living below the current indexed standard during any given year.

standard of living

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stand·ard of liv·ing • n. the degree of wealth and material comfort available to a person or community.

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