Income up as GDP falls
Norway exemplifies a trend leading some to question whether GDP measures wellbeing
M. Michael Brady
Conventional economic wisdom holds that the gross domestic product (GDP) of a country is the best gauge of the health of its economy. Likewise, spread over the population of a country, per-capita GDP is an index of the economic wellbeing of its residents.
That bit of wisdom recently has been questioned, not least by the Organization for Economic Co-operation and Development (OECD), devoted to stimulating economic progress and world trade among its 34 member countries. By the myriad statistics that it compiles and crunches, the OECD has become the benchmark source of numbers for comparing economies.
In the eight-year period from the first quarter of 2007 through the first quarter of 2015, the OECD found that while the GDP per-capita average for all countries rose by 3.3%, the countries’ household disposable income (HDI) average rose by 8.1%. The disparities between GDP and HDI for some individual countries are greater, which suggests that the GDP growth figure of a country may not be the best indicator of the increase of wellbeing of its residents.
Norway is an exemplary economic case history. From the first quarter of 2007 through the first quarter of 2015, Norway’s per-capita GDP fell by 1.9%. By conventional economic wisdom, this figure might be read as that of a troubled economy. However, increasingly high wages and labor participation rates have raised Norway’s HDI by 16.1%, among the highest of any OECD country. (The comparable figures for the U.S. are a per-capita GDP increase of 3% and a per-capita HDI increase of 5.6%.) The fall in Norway’s per-capita GDP is due to the dwindling prices of oil and gas that together account for about a quarter of the country’s GDP.
The OECD dashboard, a collage of statistics that show how households are faring in OECD countries, from which the chart shown here was compiled, link at: www.oecd.org/std/na/household-dashboard.htm
This article originally appeared in the Oct. 16, 2015, issue of the Norwegian American Weekly. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.