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What is Standard of Living?

By Mike Howells
Updated May 16, 2024
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Standard of living is the name given to a general demographic measure that attempts to combine a variety of conditions — such as education, purchasing power, and healthcare — into a measurable statistic. It is distinct from the related, but more nebulous, measure known as quality of life, which also considers more subjective factors, like leisure opportunities and happiness. This measure is used in a number of ways, most often in comparative economics that rank countries against one another in the financial health of their citizens.

One of the key conceits behind standard of living is that it goes beyond simply measuring the overall wealth of a country, which itself is reflected by overall gross domestic product (GDP). On this measure alone, countries such as the U.S. and China inevitably rank at or near the top, due to the size of their economies. When taking into account additional factors that affect living standards, however, the rankings can change dramatically.

Opinions differ among economic researchers as to the ideal so-called list of ingredients that should make up a standard of living measure. With so many different ways to measure the quality of a country's healthcare, for instance, there is no single, concrete list of factors that comprise a unified living standards formula. As a result, there are many different statistics generated by various research groups that may be called standard of living.

Nevertheless, there are some basic factors that make their way into most living standard assessments. One of the most common is per-capita GDP. This essentially describes the wealth of a country on a per-person basis. It comprises part of the Human Development Index, one of the most popular standard of living estimates, and is used by the United Nations to assess the relative development of countries around the world.

Per-capita GDP is considered a more revealing measure than overall GDP, as it reflects more accurately how much income the average person takes home. Used in conjunction with a statistic like wage disparity, and a more true picture of a country's actual living standard emerges. The U.S., for example, has one of the largest per-capita GDPs, but also one of biggest wage disparities in the world. That is to say, the gap between the rich and the poor in America is greater than that in other countries. This serves to knock the U.S. down on the list, while countries with smaller overall GDPs — but less wage disparity — may see their rankings improve.

Other factors that may or may not be included in a given standard of living assessment include life expectancy, gender equality, and political stability. Different researchers may assign more or less weight to these various factors as well. Most respectable research groups publish their methodology along with their results, and it is important to be aware of what goes into a given formula when comparing rankings.

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Discussion Comments
By anon256889 — On Mar 23, 2012

How dos one qualify for AFDC? I am the single mom of two (a 4 year-old and 3 week-old baby). I pay $900.00 month to stay in a pay by the week motel. I work as a waitress and there is rarely enough clear to cover my rent.

By aplenty — On Jan 24, 2011

@ Framemaker- The UN standard of living index is a great place to start your project, but you need to remember that standard of living is a subjective term. One person's definition of standard of living may differ greatly form another person's definition. You will find all kinds of standard of living lists that rank quality of life on a number of factors. I can say however that the common theme is that economic activity is only a small part of the standard of living.

If you need information on the governments, literacy rates, or any other political or demographic facts, you may want to try the CIA world Factbook. The Economist also releases a series of economic reports on individual nations as well. If you have access to a University library, you will likely be able to access these reports free.

By GiraffeEars — On Jan 23, 2011

@ Framemaker- The United Nations releases an annual report that measures international human development indicators. The report measures four indicators within three dimensions to compile the Human Development Index. The Report also tracks other indexes that measure gender inequality and multidimensional poverty.

The indicators measured for human development are life expectancy, the mean and expected years of schooling, and the Gross National Income (GNI) per capita. These four indicators will give a basic look at what makes life livable and enjoyable. The index also ranks all the UN member states based on these indicators so you can take a look at which nations are progressing and which ones are regressing when it comes to human development.

The index is not perfect though. The index does not account for things like ethnic and cultural disparities, the country's income gap, or the affordability of staples. You will still need to determine which of these are important to your research.

By FrameMaker — On Jan 22, 2011

Is there a list that ranks the standard of living country by country? I am writing a paper on the standard of living in the United States. I am trying to see how it compares to the standard of living in nations like China and India. I want to research how the standard of living in these countries ties into the type of political and economic systems that they employ.

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