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Measuring National Income and Individual Well-Being with GDP

Gross Domestic Product (GDP), as per Investopedia, is defined to be the main indicator that is used to describe the wellness of any nation on economic scale. It determines the country’s overall economic health. It tells us the value of various things in dollars that are produced in a specified period of time. Every government wants to raise their economy; thereby increase the Gross Domestic Product. But is GDP really the right measure of an individual’s well-being? GDP has always come up as a measure of output rather than welfare. It ignore various important factors like personal assets, individual well-being, effects on the environment and non-paid activities such as mother care, which is not considered important in-spite of its significance for building a civilized society.

It is a sad thing to say that GDP only counts the output of a country over a specified period of time. It does not cover the personal assets of those, who are said to be the economy changers. It is evident from various surveys in different nations that only a few of the rich people have the assets that are equivalent to at least one-third of the nation’s wealth. But their richness is not covered in the GDP. These people own businesses, real estates and many of the other assets in the country, Income extracted from these assets does not count in GDP. On the contrary, think of a car company owned by a corporation that is under the ownership of the government, the income from the cars that are being manufactured will be counted in the GDP. Social security and welfare payments of the government, stock and bond exchanges and changes in the personal asset’s value are a few things that matter a lot, but are ignored from GDP. Even some of the black market channels of income are being utilized by some people to create huge incomes, mostly in the third world countries, where a large share of the economy can be changed if the system is rectified. The Oracle of Omaha, Warren Buffet, clearly stated in his words that whenever a country needs more income, it should be extracted from the people who have it. And there is no reason not to do it. Rich people can afford to pay high taxes, donate huge sums of their fortune. Buffet had donated 37 billion dollars, even then he is a multi-billionaire. Thus, there is a very feasible solution to raise GDP in terms of finances and economy; interact with such great minds and help in developing your nation.

Surveys of well-being indicate that in most of the countries, only rich people show signs of happiness than the poor people. But if these surveys are repeated in the same nation, it revealed the fact that there is no increase in the overall happiness of wealthy people although their income increases. The creator of GDP, Simon Kuznets (1934) stated, “The welfare of a nation can scarcely be inferred from the measurement of national income”. A general explanation for this paradox is that after attaining a certain level of wealth, people care more about retaining that position in income scale rather than their absolute position. Their happiness is looking down on less successful people; to get satisfaction. These results of surveys on happiness are puzzling as they are not consistent with facts of an individual’s behavior. For instance, if people are so much concerned about their economical safety, then why did the financial-crisis worry everyone? Surveys show that by reducing the work hours, productivity is increased because of refreshed mind. Apart from this, everyone is working so hard, that they are not having enough time for their leisure activities. Such activities are needed for efficient, effective and productive performance.

GDP has always ignored the negative effects on the environment. See the irony of it, the GDP of a country rises if it is struck with a natural disaster like tsunamis and earthquakes. The reason behind this is that the damage has to be replaced, the loss has to be covered; and for this, people have to buy new stuff. Consumers increase, so does the production, hence the GDP rises. Similar is the case of with natural resources of a country, the more it is used, more is the GDP, irrespective of the negative effects of its usage and depletion. Getting treatment for illness contributes for a significant portion of GDP as money is invested in nation’s economy. Thus, death can be considered as source of profit for a nation. But the shameful thing is that important things like mother care and household work, which are the building blocks of a society are not covered in GDP. If a child is deprived of a mother’s love, just think what society we would create. Robert F. Kennedy (1968, March 18), has clearly demonstrated in his words about the weakness in measuring ourselves only on wealth:

• “Yet the Gross National Product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.”

Although GDP represents the wellness of a nation on economic scale, but still it has many shortcomings. Many alternatives and amendments can be done to the GDP to measure wellness. GDP can be substituted by a term GNP (Gross National Product). If we consider the example of Saudi Arabia, with people having huge personal assets, this is the perfect way to measure the per-capita income; and GNP in such a scenario would be much higher than the GDP, as income from the external assets are so large. A few ways to change this system are measuring actual well-being, improving the existing setup and also by assessing various surveys and there results to get a new theory; that could contribute to all-round development of the nation. David Cameron (May, 2006), the Prime Minister of the United Kingdom stated, “It’s time we admitted that there’s more to life than money, and it’s time we focused not just on GDP but on GWB- general well-being.”

The Canadian Workplace has changed tremendously from last few years. The new culture of the work force; all happening in a totally different environment than what it used to be is a matter of concern for many people. For some it has open wide gates of opportunities, for some it is troublesome in a way that they are getting new competition. The local residents, immigrants, aboriginals and even the women are affected by this change. There are many factors to the changing workplace,

Looming Retirement Crisis

The looming retirement of the baby boomers is a great cause of concern in the changing Canadian workplace. More than a third of the whole labour force is retiring over the next two decades, thereby creating awareness among employers to use the current labour pool more efficiently. The problem does not end here, each group of the work force has it’s own limitations. For example, the immigrants are facing problems relating to language and credential recognition, the aboriginals have to achieve higher educational levels than before, the women are not earning as much as men and also they are unable to secure the corporate level posts, and lastly old aged people, who are not able to get a secure job which would lead them to a smooth retirement.
The education has proved to be a dividing line; wealthier families are utilizing most of the sources that are needed to elevate one’s status in the society. The gap between the rich and the poor is increasing slowly and gradually for the past quarter century. Thus only the rich Canadians are able to get profits on the before-tax earnings. The middle-income and low-income are either able to earn from hand to mouth, or they are at the risk of going down the financial system towards poverty. Old Age Security & Canada child tax benefits are the two programs that could provide some ground to stand on, but these programs are not too helpful to live life without worries. The working adults are at greatest risk. The income assistance programs generate disincentives, which can be helpful in a way that the employment benefits may be outweighed by the loss of benefits like housing and health care. The cover of the pension plan is tremendously decreasing and thus the problem of saving for retirement is a matter of great concern per individual. Similarly, most of the Canadians don’t save for their personal use and this is creating insecurity for the forth coming generations. Even the fertility rate is not that high as required, thus there are lesser young people to cover this gap. But it is most unlikely that it would pose a threat, because the corporations are already planning to distribute the current pool of labour in such a way to minimize the effects of any slowdown.

Trends in Economic Growth

Howe Institute published recently, that immigration rates have to be 2.5 times their present level to maintain labour force growth. Although it is highly unlikely, if a slowdown occurs, the corporations will raise the employee wages to involve more people to increase their productivity. The rate of women workers is converging, but still there are many jobs in which women are underrepresented in most jobs and roles, especially at the management positions. Anemic productivity is a factor that greatly affects the Canadian economic growth. Productive rise has been slow in the ongoing decade; it is 1% annually. If mixed up with the current labour growth force which is merely 1%, implies that Canada’s potential to grow is very weak in coming years.
Canada has shown a fall of levels in terms of productivity among the original 20 nations, from 3^rd to 17^th in 1960. It is estimated that Canadian productivity level is 73.6% of the United States. Although much of the remedies have been already implemented, the problem still persists. Also, the shift from the manufacturing to service sectors is another change of trend in Canada. This trend-shift is prevalent in most of the developed countries where the industries like scientific and technical services, health care, food services and accommodation are outsourcing most of the work to emerging economies like India and China. These, no doubt, have created jobs in Canada, but that is not going to last long due to lack of labour in coming years.

Rising Educational Requirements

Studies have shown that maximum part of jobs in Canada over next five years will need post-secondary knowledge. Higher education is gaining grounds for working in most of the developed countries. Maximum of good jobs have gone into the pockets of college or university graduates, leaving behind those with school degrees. If this scenario is to continue, the multinational companies and corporations will look forward for more skilled and multi-talented person to come and join their office. This will lead directly to discarding the current pool of work force. Canada is now an international hub for both business and education; therefore there is greater competition for the Canadians, both from inside and outside the national borders. The education standard is raising so much, that even with high school grades, by which one could easily get into any good Canadian university; it is becoming difficult to clear the cut-off. Participation rate is declining drastically. Even the families are responsible for it. Some parents do not value the education as much as the wealthier families do, thereby increasing the gap of the rich and the poor, both in terms of income as well as education. The federal programs that were designed to alleviate these costs for lower income families are inefficient. It’s an astonishing and scaring fact that the higher income quartile students are benefitted with more subsidies (tax credits, monetary transfers, grants and student loans), thus proving that lower income quartile families are not making proper use of their privileges due to financial inefficiency and the failure of the transfer system to distinguish between wealthy and the needy. Thus there is a need to ensure that most of the Canadians should have access to higher education in any field, thereby preventing the educational barrier for barring them from the endless opportunities. The survey of Registered Education Savings Plan shows that families whose income is above $75000 annually hold maximum of its holdings. Many people do not consider this literacy problem as a threat, but it actually is; especially for the new immigrants, who have to first fit in the system, learn about the workplace, and also contribute to the Canadian economy as a whole. A study shows that immigrants are more likely to get a degree from Canadian college or university than Canadian residents.

Changing workforce compositions

There has been a great change in Canadian workforce composition. Most of them are coming from groups that are non-traditional like aboriginals, women, immigrants and even the elderly workers. The wage difference of men and women has been an issue since a long time now, but nothing remarkable has been done yet. But, women participation in the Canadian workforce is converging to men participation. The data shows that 47% of the workforce is constituted by women, thereby making Canada women driven nation (mostly). Most of the degrees are awarded to women, telling their majority enrollment in the universities. Also it has been proved that more than 50% percent of the women in Canada are holding higher education. Still the wage gap exists, which is a bit upsetting, inspite of all these statistics. Those countries which give equal privileges to women as compared to men prove that women either work equally to contribute to the economy, or they perform even better. Every fourth out of a hundred women work in part-time jobs for raising their child in a better way. With the aging of the Canadians, the Canadian workplace is bound to be filled up by the immigrants from throughout the world. Market outcomes indicate that the current force of immigrants is not able to integrate wholly in the Canadian workplace and that there is restlessness in the office relations between the Canadian born citizens and the immigrants. Education and language are the key factors for this difference and difficulty to incorporate oneself in a new environment. But the new rules that are being implemented are making it sure that only the cream enters into Canada, which means more skilled labour is being introduced in the market instead of unskilled labour; who come here and get trained to earn a living. Various policies are deployed by the government to ensure the all round safety of the immigrants. It is evident from various studies and surveys those skilled immigrants with additional knowledge of French and native English outperform their Canadian counterparts. Immigrants try their level best to get the highest qualification in their field of interest to serve to a better economy, which is not in the case of Canadian residents. As aboriginals are the fastest growing people in Canada, points to the fact that they would serve as the primary labour source in the coming decades.

Changing Trends in Work

Along with the structural changes, Canadian workplace has also shown a change in the kind and type of work done. Increase in the trend to flexible work and the shifting from the traditional primary manufacturing business to outsourcing and thereby creating a temporary arrangement is greatly affecting the kind of jobs available. Studies show that a Canadian worker has 3 careers to choose from and as much as 8 jobs in their working lives.
Nowadays due to this temporary arrangement, there has been a sharp rise of approximately 7% in the part time jobs over full time jobs than in the past. This raises a question in front of the government as to how they should handle such a situation and provide better work security to the workers. They have to work on this issue to convert the fluctuation in demand of the workers to a constant figure. There is a need to provide more benefits to contract workers, and if they perform well, they should be converted to permanent workers, thereby increasing job security, creating more space for those who are interested in the contractual jobs and thus boosting the economy.