Standard Of Living

Updated on January 31, 2024
Article byPriya Choubey
Edited byAaakriti

Standard Of Living Definition

Standard of living denotes the quality of life lived by individuals. It often refers to the affordability of necessities, comforts, and luxuries purchased by individuals to enhance their well-being. It aims to improve the overall quality of life for individuals and societies by providing access to basic needs, such as food, shelter, healthcare, and education, as well as opportunities for personal and economic growth.

Standard of Living

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The standard of living plays a key role in the economic development of a nation. When the living standards of a nation’s residents have significantly improved, it positively impacts its economic development. The objective aspects of life also become clearer with higher prosperity.

Key Takeaways

  • The standard of living can be viewed as a measurement of the ability of a group of people to afford material prosperity or a life of good quality.
  • It aims to improve the quality and comfort of people’s lives through various socioeconomic factors such as income, education, healthcare, and access to basic needs.
  • A widely popular tool in measuring a nation’s standard of living is the average real gross domestic product (GDP) per capita.
  • The standard of living impacts a variety of attributes of a population, including happiness and productivity. This is significant since a stronger economy generally results from increased productivity and happiness.

Standard Of Living Explained

The standard of living can be viewed as a measurement of the amount of material prosperity or quality of life experienced by an individual. In other words, it is the ability of a group of people to consume desired goods and services. It can be about a group of people or a particular geographic area, such as a nation. In economics, one country’s standard of living is frequently compared with that of another. This is done to assess the relative prosperity of an entire nation’s population.

Comparing the life standards in nations with vastly different levels of dispersion can be challenging. In reality, there are significant differences across and within nations. By most measures, the disparities in the standards between developed and less developed nations are more pronounced than between developed economies. Similar is the case for developed and under-developed areas within a country.

This metric reflects a country’s well-being standards. Comparisons are made between economies to see how far they have come as a nation, to understand what is lacking, and to bridge the gap in those areas. Hence, the right to an adequate standard of living has been declared a fundamental right. This means every human being is born with the entitlement to pursue a decent living standard.

Universal Declaration of Human Rights Article 25.1 expresses that everyone has the right to a minimum standard of living sufficient for their health and their family’s well-being. This includes access to food, clothing, shelter, medical care, and essential social services. They also have the right to security in the case of unemployment, illness, old age, disability, widowhood, or other forms of loss of livelihood due to events beyond their control.

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There is no specific standard of living calculator to make an accurate measurement. Hence there are no rankings for the standard of living by country available. However, several measures are put in place to understand it better. Average real gross domestic product (GDP) is a widely used metric to measure the standard of life.

This is how:

  • The total value of new products and services produced within a nation’s borders is measured by GDP, the annual economic output.
  • It is the inflation-adjusted value.
  • If the total GDP were divided into equal parts, the average GDP per capita would show us how much each person’s share of GDP would be.


Now the calculation of GDP is quite easy. The value of all products manufactured and services created within a nation’s borders after being adjusted for inflation is divided by the total population. If the GDP per capita is increasing, (a) there will be more goods and services accessible to consumers, and (b) consumers will be in a better position to purchase them.

However, GDP per capita is not a perfect indicator of how well we live. This is because numerous factors, such as the following, are not considered:

  • Unpaid work — The value of housework, child and elder care provided in the home, volunteer work, and community service is not recognized by the original GDP per capita.
  • Distribution of wealth – There is always a chance that a sizable portion of the GDP per capita increase will go to a comparatively small portion of the population. 
  • Changes in the quality of life — The value of factors like clean air and water, more free time, and longer life expectancy is not fully accounted for by GDP per capita, nor is the expense of unwanted changes like increasing traffic congestion or the loss of open space.
  • Changes in the quality of goods — GDP per capita does not accurately reflect changes in the quality of commodities. However, quality improvements to vehicles, computers, and a few other products are considered in GDP numbers.

Another indicator that can be used instead of a standard of living calculator is the Human Development Index. This gives a pretty good idea about the standard of living by country as it measures “decent standards of living” using the GNI (Gross National Income) per capita. In the HDI, life expectancy and education are also measured.


The idea of decent living standards centers on the notion that most people need necessities, allowing them to have accommodation, food, and water. Many factors thus contribute to it, and some of them are as follows:

Economic elements that are easily quantified:

  • Average income
  • Consumer spending
  • Housing and supply costs
  • The poverty rate in a particular location
  • The availability of products and services
  • The rate of inflation
  • Employment opportunities, and
  • GDP (Gross Domestic Product)

Non-economic factors:

  • Healthcare availability (life expectancy)
  • Educational opportunities
  • Social services
  • Housing affordability
  • Local crime rates
  • Social and political freedom etc.


Check out these examples for a better idea:

Example #1

Suppose there are two countries, “A” and “B.” Between country A and country B, one has a higher GDP per capita than the other. This means that the citizens of A can generate a comparatively higher income which helps them afford their necessities, comforts, and luxuries proportionate to it. On the other hand, because of the lesser GDP per capita, a majority of the population of country B struggles to meet their daily needs. Therefore, it has fewer chances of affording material comforts. Country A is therefore considered to have higher standards of living than B.

Example #2

According to reports, a portion of the UK population will not have a decent standard of living by 2024. This is because economic conditions heavily influence people’s standard of living. When prices increase, certain population segments may not be able to afford the same lifestyle or continue consuming the same products. Unemployment, on top of it, could only make things worse. In addition, the recent surge in global energy and food prices, reducing household income, is expected to push the UK population back regarding the standard of living.


Happiness and productivity are just two of the many aspects of a population that the standard of living can impact. This is crucial since an economy improves overall with higher productivity and happiness. Studies have found that happy people are also better employees and societal contributors. Productivity also translates into higher business earnings, worker wages, and more funding available for social and governmental endeavors.

Living standards give an insight into income, a country’s political and economic stability, the level of safety, the environment, and the economy’s growth. The elevation of its residents’ living standards favorable impact the economic development of a country. Additionally, the standard of living aids in understanding the objective aspects of life, such as environmental quality, GDP, poverty rate, etc.

Standard Of Living vs Quality Of Life

Here are the key differences between the quality of life and standard of living:

Key differencesStandard of livingQuality of life
Meaning It is the measure of comfort and material things a particular group of people can access.It is a measure of happiness and is subjective.
Indicators Things that are simple to quantify, such as income, employment prospects, the cost of products and services, and poverty, are used to measure a person’s standard of life. The list also includes elements like life expectancy, the rate of inflation, or the number of annual paid vacation days. Depending on a person’s lifestyle and personal preferences, different things influence their overall quality of life. For example, conditions at work, access to healthcare, education, and physical living conditions are some elements that impact a person’s quality of life. 
Focus Living standard focuses on material well-being.Quality of life focuses on mental and physical well-being.

Difference Between Cost Of Living And Standard Of Living

Here are the key differences between cost and standard of living:

Key differencesCost  of living Standard of living 
Meaning The cost of living is the price of sustaining a particular standard of living in a particular geographic area.The term “standard of living” describes the amount of money, comfort, material things, and necessities available for a particular geographic area, usually a country.
Measure Purchasing power parity (PPP), or the cost of living index, is used to calculate the cost of living. Several different indices determine the standard of life; hence, there are many ways to calculate it.

Influence and inference
The cost of living differs depending on the location, city, state, nation, or region. It is calculated for each country. Wages influence it and determine how expensive a place is compared to others. It is influenced by income and the quality of life and determines how well people live without compromising their desires.

Frequently Asked Questions (FAQs)

How does inflation affect the standard of living?

The purchasing power of certain customers tends to diminish in an inflationary environment due to uneven growing costs. As a result, they will not be able to afford the comforts they desire in this manner. Thus, inflation may lower the standards of life.

Which country has the highest standard of living?

Countries that have ranked well in terms of quality of life and HDI can be referred to as having high living standards, as there is no separate measure to determine it. For example, Sweden has been ranked first (2021), and Switzerland has the highest standard of living in terms of HDI.

How to improve the standard of living?

Improved employment opportunities, GDP, increased income and the resultant spending, affordable housing cost, etc., can help improve a country’s living standard.

How did the industrial revolution affect the standard of living?

A rise in income, the production of commodities, and the standard of living were all observed during the industrial revolution. Because of their higher living standards, people could access cheaper commodities, nicer homes, and healthier meals.

This article has been a guide to the Standard of Living and its definition. We explain its measures, examples, comparison with quality of life and cost of living. You may also find some useful articles here –