Better life through higher income

Posted on May 27, 2011 in Policy Context

Source: — Authors: – – OECD’s ‘Better Life Initiative’ is slick, but downplays the impact of income
May 25, 2011.   William Watson

I expected to hate the “Better Life Index” issued by the OECD this week to help celebrate the organization’s 50th birthday. First there’s the clumsy ambiguity in the name: Does “better” modify “life” or “index”? Are we getting a better index about life? Or are we getting an index of the better life? And if the latter, why not the good life rather than the better life? Most of the data used are not comparative but absolute: What is the current level of disposable income in country X, not how much has income changed recently in country X.

There’s also the problem of the subliminal ideological message: International bureaucrats of the OECD ilk are always downplaying GDP and income, first, because those are areas where the United States does well and the most important rule of international bureaucracy is never to say anything good about the United States, and second, because they lean toward the anti-growth beliefs of the global environmental movement, a preference confirmed the day after the issue of the Better Life Index by the issue of the OECD’s Green Growth Strategy, whose summary for policymakers decrees that: “We have to find new ways of producing and consuming things, and even redefine what we mean by progress and how we measure it.”

Still, a slick presentation can overcome even the dodgiest substance and if you go, you find a really slick presentation. Click on “My Better Life Index” and you’re met with 34 daisies, one for each OECD country. Each daisy has 11 petals, indicating the country’s performance on a scale of one to 10 on 11 different measures of well-being (income, health, employment, work-life balance, and so on). You can ask for a ranking on each of the petals, in which case, as if blown by a summer breeze, the daisies dance around to reconfigure themselves in order by that variable.

More critically, you can also change the weight on the 11 measures of well-being (thus graphically making a petal thicker or thinner) and then see how the daisies rearrange themselves. For instance, part of our high score comes from the fact that 78% of us tell pollsters we’re happy with our lives — compared with an OECD average of 59%. If you think that datum is less about how satisfied we really are and more about Canadian politeness, diffidence, unwillingness to complain, secretiveness about revealing internal dissatisfaction to telephone interviewers — whatever — you can put the weight on self-reported items to zero and then see what happens to our overall ranking.

As always with such exercises, the details are more interesting than the overall results. For instance, among OECD countries it was a safe bet that we Canadians have the most room. But who would have thought we also had the most rooms? We do. We rank highest among OECD countries with 2.5 rooms per person. In the United States, by comparison, the average person gets along with only 2.3 rooms (though they’re probably bigger rooms). In Turkey, the worst-off OECD country in this respect, the average is barely half a room per person.

And while you may not be surprised to learn that we Canadians were least likely among OECD citizens to report ourselves as having been attacked in the previous year, the next two safest countries after us were Japan, also not a surprise, and the United States, a big shock. Similarly, in the United States, 19% of people said they felt unsafe on the street after dark versus 17% here and 29% in the OECD overall. The United States also surprises by showing great confidence in government — though here one component of the measure is percentage turnout in votes. Though the U.S. turnout numbers in national elections are not much better than our own, it apparently gets credit for low voter registration, which means its turnout is high as a proportion of registration. Needless to say, safe and trusting in government is hardly our impression of Americans.

The difficulty of drawing sensible inferences from numbers like these is one reason to go back to income as a measure of well-being. There are well-known problems measuring income, but it does at least come in number form already. If you look at the 11 petals that make up the Canadian daisy, the shortest of all is the one for disposable income. On a scale of one to 10, we only get a four for our income. The problem here is tiny Luxembourg, which screws up the scale. Per-capita income in Luxembourg is US$44,212. In the United States, the second-highest income country on the list, it’s US$37,690. Our US$27,105 actually puts us fourth in terms of income. But compared with Luxembourg, our petal is stunted.

Look at that difference between us and the United States: $37,690 versus $27,105. We’re more than $10,000 behind. Per person. What do we take from that income difference? Maybe income doesn’t matter: we do better overall on the Better Life Index than the United States despite our lower income. Maybe there’s a trade-off and if we have to choose higher income versus better scores on other things, we’ll take the other things.

But maybe there isn’t a trade-off. Maybe higher incomes wouldn’t reduce our safety or propensity to vote. And look at the other things on the list: Rooms per person. Health. ­Education. Higher incomes might well help us get even more of these things. Higher income and better health are well known to be correlated. With higher incomes we could buy even more rooms, educate ourselves better, hire more cops to protect us or, if you prefer, finance more programs to prevent kids from going bad.

No matter what the OECD wants us to think, higher incomes and better lives are very likely linked.

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