GCSE ECONOMICS: UNIT 12
UK POVERTY
Measurement of standards of living
SECTION 2
UK POVERTY
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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
SECTION 2
UK POVERTY
Today you will...
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Identify how we measure standards
of living
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Explain the different measurements
of standards of living
SECTION 2
UK POVERTY
Standards of living...
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Someone who has a poor standard of
living will tend to be classed as living in
poverty and vice versa
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Standards of living refer to how well off
an individual, group or country is at a
point in time
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Measuring standards of living allow us
as economists to compare individuals,
groups and counties with each other
now and over a period of time
SECTION 2
UK POVERTY
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Standards of living...
Who do you think has the
highest standard of living in…
1. The Class
2. The King’s Academy
3. Middlesbrough
4. The UK
SECTION 2
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.
SECTION 2
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
SECTION 2
UK POVERTY
Measuring Living Standards:
Real GDP per capita
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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
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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
SECTION 2
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.
SECTION 2
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.
SECTION 2
UK POVERTY
Measuring Living Standards:
Education & Health
 A person’s standard of living can also be
defined by their level of education and health,
or their access these basic services
Q. How does a person’s 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
SECTION 2
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!
SECTION 2
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