What Is a Standard of Living?

A standard of living is the level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or a certain geographic area. The standard of living includes basic material factors such as income, gross domestic product (GDP), life expectancy, and economic opportunity. The standard of living is closely related to quality of life, which can also include factors such as economic and political stability, political and religious freedom, environmental quality, climate, and safety.

Key Takeaways

  • Standard of living is the material well being of the average person in a given population. It is typically measured using GDP per capita.
  • Standard of living and quality of life are similar in that they utilize some of the same data, but standard of living represents a more physical aspect of life while quality of life represents the more intangible aspects of life.
  • One alternative standard of living data set is the HDI, Human Development Index, which uses many factors from life expectancy and education, to GNI, and homicide rates.

Understanding Standard of Living

The standard of living is often used to compare geographic areas, such as the standard of living in the United States versus Canada, or the standard of living in St. Louis versus New York. The standard of living can also be used to compare distinct points in time.

For example, compared with a century ago, the standard of living in the United States has improved greatly. The same amount of work buys an increased quantity of goods, and items that were once luxuries, such as refrigerators and automobiles, are now widely available. Also, life expectancy has increased, and annual hours worked have decreased.

In a narrow sense, economists frequently measure the standard of living using Gross Domestic Product (GDP). Per capita GDP provides a quick, rough estimate of the total amount of goods and services available per person. While numerous, more complex, and nuanced metrics of the standard of living have been devised, many of them correlate highly with per capita GDP.

Standards of living are usually higher in developed countries such as the United States, than in less developed nations. In fact, basic measures of the standard of living (such as per capita GDP) are often used to define the differences between more and less developed countries. Emerging market economies usually see rising standards of living over time as they grow and develop into modern, industrialized economies.

An Example of a Living Standard Measure

One measure of standard of living is the United Nations' Human Development Index (HDI), which scores 189 countries based on factors including life expectancy at birth, education, and income per capita. As of 2018, the countries with the five highest HDI scores are Norway (0.953), Switzerland (0.944), Australia (0.939), Ireland (0.938), and Germany (0.936). Conversely, the countries with the five lowest 2018 HDI scores are Niger (0.354), Central African Republic (0.367), South Sudan (0.388), Chad (0.404) and Burundi (0.417), although Syria, Libya, and Yemen experienced the most dramatic decreases in living standard.

To exemplify the difference between the scores of 0.953 and 0.354, Norway has a life expectancy at birth of 82.3 years, 17.9 expected years of schooling (per citizen), gross national income (GNI) per capita of $68,012 (PPP-adjusted currency units), a homicide rate (per 100,000 people) of .5, and an internet usage rate of 98.4% of its population. Niger, meanwhile, has a life expectancy at birth of 60.4 years, 5.4 expected years of schooling, a GNI per capita of $906, a homicide rate of 4.44, and an internet usage rate of 10.2%.

The U.S. scored thirteenth on the list, with a combined score of 0.924, a life expectancy at birth of 79.5 years, 16.5 expected years of schooling and GNI per capita of $54,941.

Standard of Living vs. Quality of Life

The terms standard of living and quality of life are often believed to mean the same. While they may overlap, there is a difference between the two. A standard of living generally refers to wealth, comfort, material goods and necessities of certain classes in certain areas—or more objective characteristics, whereas a quality of life is more subjective and intangible, such as personal liberty or environmental quality. Characteristics that make up a good quality of life for one person may not necessarily be the same for someone else.