When measuring wellbeing, GDP is not the whole story

The GDP measures a country’s economic output, and it is one of the most important economic indicators. Due to wide data availability, it is frequently used in political debates to compare prosperity across countries or to assess economic progress. However, researchers have long pointed out that GDP figures alone do not paint the full picture when it comes to measuring wellbeing. For example, per capita GDP often rises after wars or natural disasters because reconstruction spending can boost short-term growth, even as the population’s wellbeing suffers. Inequality, educational opportunities, and health are also left out. “We need perspectives beyond the GDP to better assess prosperity,” says Prof. Klaus Prettner, an economist at WU Vienna.

The added insights that complementary economic indicators can add to the picture become clear when comparing Austria to the US, for example. While the US is significantly ahead of Austria in terms of GDP per capita, that picture shifts once aspects such as health and income distribution are taken into account, seeing as these factors also play a central role in Austrian social and economic policy. The inequality-adjusted healthy lifetime income (IHLI) indicator, for instance, measures income over people’s healthy lifetime while also accounting for inequality. In 2022, Austria’s IHLI was about 3.2 million international dollars per person, compared to approximately 2.8 million in the US. “Especially in wealthy countries, complementary indicators reveal structural differences that the GDP alone doesn’t show,” says Dr. Junlai Zhang, an economist at WU Vienna and Heidelberg University.