THE TERM “standard of living”, which was cited by Taoiseach Brian Cowen in his speech on Thursday evening, is somewhat subjective.
But according to Jean Goggin, of the Economic and Social Research Institute (ESRI), gross national product (GNP) per capita is one of the most common ways of measuring it.
GNP per capita measures the average income of a country’s population, and gives a general picture of a country’s overall wealth.
Ireland’s GNP per capita rose steadily over the last decade and peaked in 2007 at €36,588. However, in its quarterly economic commentary issued in December, the ESRI estimated that GNP per capita fell by 4.5 per cent in 2008 to €34,959.
The ESRI is predicting a further fall of 4.3 per cent this year, which would bring GNP per capita to €33,471 this year, bringing the standard of living back to 2004 levels.
The ESRI has not yet issued its forecast for 2010 or beyond, but it is possible that the 10-12 per cent prediction was made by extrapolating the trend for 2008 and 2009 outwards.
One weakness of measuring standard of living using GNP per capita is that it fails to take into account how wealth is distributed across the population.