In response to increasing calls for the adoption of an alternative to GDP as a measure of economic progress, Feasta, in collaboration with the German research institute FEST, has just published a feasibility study for the development of a National Well-being Index (NWI) for Ireland.
The NWI in its current form consists of 20 components that are aggregated in order to obtain a single index, which the study applies to the years 2000-2014. FEST have significant experience in producing the index not just at Federal level but at regional and city level in Germany, however, this is the first time that a transnational comparative study has been carried out.
One of the components of the index is housework. “There’s been a lot of discussion lately about the fact that retired Irish women often have pensions that are a fraction of the size of mens’ pensions. They’re being penalised by the government for the fact that many of them spent so many years at home doing unpaid work, or caring for others.” notes Seán Ó Conláin, a member of Feasta’s Beyond GDP group and one of three Irish team members who contributed to the study. “This index takes a step towards rectifying that by making an attempt to account for the true worth of their contribution to society.”
Another component of the index is private consumption, which is weighted to take income inequality into account. Other components include heathcare, education, the value of voluntary work and environmental damage – the latter two of which are not included in GDP. According to John Sweeney (Professor Emeritus NUIM) and a member of the Irish team : “Classical economics ignores the costs imposed on society through environmental degradation; but components such as clean air, clean water and a healthy natural environment are essential aspects of well-being and quality of life. This index attempts to incorporate many such neglected variables in providing a fuller picture of what matters to people beyond the narrow confines of GDP.”
Amongst other findings, the study indicates that Ireland’s GDP boom prior to 2008 did not translate into a welfare boom of the same magnitude.
Moreover, during the period when Ireland experienced its highest GDP, from 2001-2004, the NWI remained static and even declined slightly: “While consumption and expenditure on health and education increased considerably, other social and environmental components mostly did not improve. In addition, income inequality increased.”(pp 18-19)
The study is modelled on an index that was developed by FEST to examine well-being on the local, state and federal levels in Germany, and includes a comparison with the German findings. “Although a big challenge to gather data at local level in Ireland, there is increasing awareness at local level of the importance of broader based metrics, to guide national strategy in an age of rural decline”, comments Ó Conláin.
The group believes that the study’s parameters could and should be adjusted to improve its accuracy and clarity, and they are seeking input and advice to this end. “Our hope is that this initial study – a significant step away from the widespread use of GDP as the fundamental measure of progress in Ireland – will trigger a lively debate on how best to measure well-being in Ireland, and thus to inform policy” comments Willi Kiefel (member of the study team).
The study can be downloaded here.
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Edit, October 19: corrected to clarify that healthcare and education are included in GDP measurements, while voluntary work and environmental damage are not.
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