The Move to a Wellbeing Measure
For a long time now, there have been discussions on the best way to measure how well countries are going in terms of their economies, but critically also how this translates into real improved living standards for our people. GDP and other economic measures are important, but are they enough?
The new Government is set to explore alternative measures to GDP and will start by building on some previous work by the Treasury to use as a “Wellbeing” measure. Finance Minister Grant Robertson said” “The Government is currently developing a comprehensive set of wellbeing measures, against which our progress in lifting living standards for all New Zealanders will be tracked and assessed. While economic measures like GDP are still important, we will move beyond using narrow tools for measuring success which often hide growing inequality and lead to generational inequity.”
This will aim to bring together a number of other existing and new indicators to provide a measure which may better reflect how our economy improving actual wellbeing of our people – including environmental measures and inequality to name a few. This will build off the Treasury’s “Living Standards Framework”, which measures the impact of policies on four capitals: Human, Social, Natural, and Financial/Physical, and may be included in 2019’s Budget.
This idea of shifting measures of economic progress has been discussed for some time – including at the OECD and World Bank, as well as a number of other Governments investigating such a measure. One example is the World Economic Forums “Inclusive Development Index”, which covers three “pillars” for measurement, including: growth and development; inclusion and; intergenerational equity – sustainable stewardship of natural and financial resources.
More data is usually a good thing, getting a better picture of our economy and society can be a useful way to figure out how to target indicators we want to improve. The challenge will be setting this up and balancing such Wellbeing indicators with other useful measures of economy growth, productivity and export income, which influence living standards, and how this translates into policy decisions and direction.
Economic growth won’t stop being a critical component of improving living standards. It plays a vital role in ensuring wages can rise and people can get ahead. For us moving away from a single focus on GDP growth can be a good thing – after all, GDP is agnostic to the quality of economic activity behind it. By way of example, $1bn of activity in tourism is the same and $1bn in manufacturing, but we know that the latter pays much better wages and thus is able to provide a better quality of life for the people employed in manufacturing. Making widgets beats making beds for most people. In addition, our sector contributes significantly to our economic complexity, which defines our ability to create complex and high-value products.
We need to push for the new measure to increase focus on [labour] productivity, which allows wages to rise. We also need to see the Government expand its focus on manufacturing, which has the potential to help improve many of the very indicators that may be included, including improving wages, export income and low-carbon growth through innovation.
To read more about the Wellbeing measure, check out Newsroom’s coverage of what the indicator may look like.