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- 4 months ago
GDP is the Wrong Measure of Well-Being for Millennials
The fifth annual MetLife survey of American value ideals shows a significant shift from prioritizing achieving professional success and material wealth to having a greater sense of personal fulfillment, particularly among younger generations. Millennials preferred a sense of personal fulfillment over having enough money by a margin of 28-20. Nearly a third of Millennials surveyed thought it was more important to have close family and friends than a roof over their heads. And, they had the highest percentage of respondents who said achieving the American dream in their lifetime was important but did not look to traditional markers (like a house, getting married, etc.) to achieve it.
Yet, at the same time, our economic accounting systems cannot accurately depict this transition towards quality over quantity. Our main measure of economic welfare, the Gross Domestic Product, sees growth as the only indication of progress. If GDP goes up, indicating more economic output, the economy is doing well. If GDP goes down, policymakers and markets worldwide begin to worry. But, what is GDP really measuring?
A new report from Demos, Beyond GDP, addresses the shortcomings of GDP and challenges the way we measure our economic growth, and in turn our overall progress. Beyond GDP highlights the failure of GDP to accurately reflect the health of our economy by not counting many goods – such as at home child care, education, and volunteerism – and not counting many bads – such as the costs of pollution and the negative economic impact of income inequality.
GDP also cannot reflect the difference between quality and quantity. Economic activity from hurricane clean up is counted just the same as increased manufacturing output, even though one is clearly better for society overall. And, it cannot reflect the gains from personal fulfillment unless there is a monetary value. Due to the heavy reliance on GDP as a measure of economic, and in turn social, well-being, there is no incentive to encourage personal fulfillment because it would likely show a decrease in spending and, therefore, a decrease in GDP.
The inability of GDP to reflect larger social trends is shown through a set of infographics accompanying the report. The infographics show that while there has been a constant increase in growth, there has been little increase in median income, a drop in pension plan participation, and increasing rates of poverty. The infographics also show that while GDP has been increasing, social health is on the decline, incarceration rates are increasing, and our use of resources is increasing at an unsustainable rate.
As priorities start to shift away from material wealth, GDP will become an even poorer metric of well being and we will need to adopt new metrics to more accurately reflect economic and societal priorities.
Photo Credit: Demos
The Discussion
As an economics undergrad, I always had these issues with GDP. It was presented as the be-all-end-all measure of economic output, but it is so flawed and generalized that I can't understand how it is of any real use. Childcare is the perfect example; if a parent who previously took care of his/her child returns to work and pays for daycare, GDP goes up by both the value of his/her work and the value of the daycare services. However, in reality, the daycare is not an increase in real output, it is merely a shift from unrecorded output to recorded output.
On the other hand, I don't think that brainstorming ways to somehow transform vague societal values like incarceration rates and childhood poverty into an oversimplified number like GDP will be any more helpful.
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Very interesting points. Any suggestions on the type of metrics to use?
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Speaking of shifting towards new metrics. During some academic research, I found a study similar to the beyond GDP concept. Globalization and Postmodern Values by Ronald Inglehart looks at World Values Surveys and the impacts of economic growth on life expectancy. What makes it more relevant is that it attempts to explain the relationship between the significance of happiness and well-being with economic development.
Valuing personal fulfillment is a typical sentiment for young people - they're optimistic. But the GDP is certainly a crude tool that can disguise, or ignore, important trends. Thanks for reminding us.
Very true. This article reminded me of the country of Bhutan. Aside from GDP this country also tracks it's GNH, Gross National Happiness, a metric devised by one of the country's kings who felt this was more important anyways. I always liked the thought of using measurements that go "Beyond the GDP"