The Stability In An Economy And Human Development - Essay Example

The Stability In An Economy And Human Development Growth has been a major economic goal for many policymakers and political leaders. It is always link to the stability in an economy and human development. The expansion in the production of goods and services relative to the population will result in the rise of real wages and income and this is supposed to make the standards of living higher. It is also evident that an economy with growth is better able to meet the needs and wants of its people. With increasing incomes, people are open for different opportunities for self-improvement such as better education and better healthcare. An economy experiencing growth can also take on new programs to alleviate poverty and ease the burden of scarcity without sacrificing other resources. Economists define and measure economic growth in terms of the increase in real GDP or the increase in real GDP per capita over some time period. GDP is a reasonably accurate and highly useful measure of how well or how poorly the economy is performing (McConnell and Brue 2005, p.125). However, it has several shortcomings or limitations as a measure of both total output and well-being. By using the real GDP per capita as a measure of growth means we are considering the size of population in the economy. And there some instances or things of importance that real GDP per capita either understate or totally does not account for. It does not accommodate the satisfaction or psychic income that many people derive from their work. The increase in leisure time has a clear positive effect on the overall well-being of the people. Next is the improved product/service quality. Because GDP is a quantitative measure, it fails to take into account the improvements in quality of products and services in the economy. The social costs of the negative by- products such as air, water and noise pollution, are not deducted from the total output. These costs also reduce our economic well-being. GDP per capita does not tell us whether the composition of the output is enriching or detrimental to the society or how these goods/services are distributed. Just as a household’s income does not measure its happiness, GDP per capita does not measure its total well-being. The 2010 Report introduces three new indices to capture important aspects of the distribution of well-being for inequality, gender equity and poverty (www.hdr.undp.org). Equity is inherent in the ideal of progress and seen as the convergence of standards of equality of opportunities or social justice (Cardoso 1996, p.44). There should be an equal distribution of resources to make more economic opportunities by making productive assets, health and education more accessible to all and thus increase avenues for human development. The more equal the distributions of these resources, the more likely that income growth will be reflected in an improvement in the life of each individual. The Gender Inequality Index is more on the topics of how women are treated in the economy because they are more likely at disadvantage in dimensions of reproductive health, empowerment and participation in the labor force. It relates human development and the inequality of male and female in terms of their achievements. The Multidimensional Poverty Index is used to measure human development resulting from their socio-economic status. The degree of poverty is seen as the cause for the deprivation or loss of access to education, health and higher standard of living. However, there are important indicators of human development that are not included in the index. This includes the empowerment, cooperation and security. The expansion of people’s capabilities involving enlargement in choices available and increase in freedom is where basic empowerment relies on. People should be free to do and choose what economic activities to participate in. Human development should also be concerned with how people interact and cooperate in their communities. As social beings, the sense of belonging becomes an important source of their well-being giving them enjoyment and direction, a sense of purpose and meaning that will make them active agents of their development. The security of livelihood is one of the basic needs of people but they also want to be secured from chronic treats of disease or repression or any disruptions in their daily lives. And human development should include a minimum level of security. GDP per capita only measures the flows of production income and expenditure which can be means to well-being of human but not human well-being per se. That is why countries with the same level of income can have different levels of HDI just like the cases of Costa Rica, Brazil and South Africa. They have almost the same level of income marked at 9.3 and 9.2 respectively but are ranked differently in terms of human development. Brazil and Costa Rica both have high HDIs but the latter ranks higher position being at number 62 while Brazil is only at 73. South Africa has 9.3 level of income but is already considered as one of the countries with medium HDIs. There are also cases when a country with higher level of income ranks lower in terms of human development than with a country with lower level of income. The case of Australia and USA is an example. Australia has 10.6 as level of income but is at number 2 in human development while USA has a higher level of income which is 10.8 but got the number 4 rank in human development. These cases only show us that the growth in economy does not reflect growth in its entire dimensions, particularly human development. It is also evident that some countries paid too much attention to growth in their economies but little was given to the well-being of its people. Growth is not the answer to everything and people can have a poor quality of life even their resources are plenty. As growth is a means of human development, there is a link between the growth in the economy and the standards of living of its people. In Bebelandia, my hypothetical country, life expectancy is 85 years old and life expectancy index is 1. In terms of education, adult literacy index is .96; gross enrolment index is .96 making the education index .96. GDP per capita is only 6000 making the GDP index marked at .683. It has a computed HDI of 0.881 making it one of the countries with high human development. Growth in Bebelandia is also directed to the development of its people and not only to the income. Other countries should also find efficient ways to convert the gains of income to make advances in human development. Aside from the progressive increase in participation of women in the economy, the level of empowerment as an aspect of human development should also be considered in the rise. It is practical to use this aspect in evaluating the well-being of an economy because it can affect the level of human development. As the people become empowered, they continue to seek opportunities and become active agents of growth both in economic and human development. They open themselves in increasing their capabilities through acquiring more knowledge and betterment of their health making them more valuable in the economy as human capital. Without proper empowerment to the people growth is far to be achieved because of the poor decisions about allocation or distribution of resources. Sometimes countries with lower incomes managed to empower and develop their people more than those countries with higher incomes. TASK 2. SINCE YOU WERE BORN… The missing series for the table is the employment of female (MGSB). It is computed by subtracting the employment of male (MGSA) from the total employment (MGRZ). YEAR MGRZ MGSC MGSI MGSA MGSD MGSJ MGSB MGSE MGSK 1971 24507 1059 15024 15498 579 3229 9010 479 11796 1972 24579 1116 15063 15472 624 3307 9108 492 11755 1973 24965 946 15018 15610 475 3418 9356 472 11601 1974 25029 949 15115 15517 480 3601 9513 470 11513 1975 24933 1174 15171 15386 656 3664 9548 518 11507 1976 24786 1414 15307 15250 822 3757 9537 592 11550 1977 24809 1470 15500 15197 840 3930 9613 631 11571 1978 24940 1453 15677 15178 808 4123 9763 646 11555 1979 25195 1432 15765 15240 775 4266 9956 657 11499 1980 25086 1833 15819 15034 1062 4361 10053 771 11458 1981 24430 2609 16004 14487 1649 4471 9944 960 11534 1982 23951 2875 16427 14135 1841 4733 9817 1034 11693 1983 23775 3081 16639 13959 1928 4951 9817 1153 11689 1984 24285 3241 16241 14162 1916 4906 10124 1325 11335 1985 24593 3151 16291 14235 1876 5010 10359 1275 11281 1986 24746 3161 16349 14191 1874 5164 10556 1286 11185 1987 25239 2940 16284 14393 1740 5202 10847 1201 11082 1988 26070 2445 16106 14824 1425 5170 11247 1021 10936 1989 26749 2082 15932 15145 1201 5151 11605 882 10781 1990 26871 2053 15939 15142 1204 5213 11730 850 10726 1991 26163 2530 16257 14580 1593 5430 11584 937 10827 1992 25540 2821 16640 14061 1870 5692 11480 951 10948 1993 25304 2928 16798 13824 1940 5869 11481 988 10929 1994 25505 2675 16911 13945 1754 5960 11561 921 10951 1995 25819 2435 16971 14110 1572 6052 11710 863 10919 1996 26060 2296 17026 14192 1484 6144 11869 812 10882 1997 26526 1988 17029 14463 1228 6211 12064 760 10818 1998 26795 1789 17137 14597 1089 6308 12199 701 10829 1999 27167 1728 17043 14767 1043 6300 12401 685 10743 2000 27483 1588 17124 14909 943 6397 12575 645 10727 2001 27710 1490 17302 15026 896 6507 12685 594 10795 2002 27921 1529 17337 15099 920 6582 12823 609 10755 2003 28186 1489 17411 15262 900 6614 12925 590 10797 2004 28485 1424 17538 15405 836 6738 13081 589 10800 2005 28774 1465 17632 15535 862 6817 13240 603 10815 2006 29027 1671 17571 15660 967 6811 13368 704 10760 2007 29233 1652 17794 15815 943 6909 13419 709 10885 TABLE 1. EMPLOYMENT, UNEMPLOYMENT AND ECONOMICALLY INACTIVE MGRZ = total employment 16+ (male and female) MGSA = employment 16+ Male MGSB = employment 16+ Female MGSC = Total unemployment 16+(male and female) MGSD = unemployment 16+ male MGSI = economically inactive 16+ (male and female) MGSJ = economically inactive 16+ male MGSK = economically inactive 16+ female MGSE=unemployment 16+ female TABLE 2. LABOR FORCE PARTICIPATION RATE TE = TOTAL EMPLOYMENT 16+ (MALE AND FEMALE) TU = TOTAL UNEMPLOYMENT 16+ (MALE AND FEMALE) TEI = TOTAL ECONOMICALLY INACTIVE 16+ (MALE AND FEMALE) LFPR = LABOR FORCE PARTICIPATION RATE Labor force participation rate is computed by dividing the labor force by the adult population and multiplying the answer by 100%. Labor force is the number of employed and unemployed in the economy. Adult population includes the employed, unemployed and economically inactive. Average or mean is computed by dividing the sum of the LFPR series by 20 (number of years). Standard deviation is computed by getting the difference of each data point in LFPR series from the mean, the answer (X) is then squared (X²) and after getting the average or mean the square root was taken. TABLE 3. LABOR FORCE PARTICIPATION RATE OF MEN TE(M) = TOTAL EMPLOYMENT 16+ (MALE) TU(M) = TOTAL UNEMPLOYMENT 16+ (MALE) TEI(M) = TOTAL ECONOMICALLY INACTIVE 16+ (MALE ) LFPR(M) = LABOR FORCE PARTICIPATION RATE (MALE) The same procedures were followed in the computation of the labor force participation rate of male, the average or mean and standard deviation of the series. TABLE 4. LABOR FORCE PARTICIPATION RATE OF FEMALE TE(F) = TOTAL EMPLOYMENT 16+ (FEMALE) TU(F) = TOTAL UNEMPLOYMENT 16+ (FEMALE) TEI(F) = TOTAL ECONOMICALLY INACTIVE 16+ (FEMALE ) LFPR(F) = LABOR FORCE PARTICIPATION RATE (FEMALE) Computation of the labor force participation rate of female, the average or mean and standard deviation of the series follows the same process as the computation for labor force participation of male, its average or mean ad standard deviation. FIGURE 1. TRENDS IN LABOR FORCE PARTICIPATION RATE OF MALE AND FEMALE The graph shows the trends in labor force participation of male and female. The trend in labor force participation rate of male is decreasing while the trend in labor force participation rate of female is increasing. We can attribute the change in male trend to the slow rate of increase in their wage rate and changing family cultures and values. The delay in increase in the possible rate of wage that men are offered in the labor market can discourage them in working or participate in the labor force. The changing cultures and values in traditional families are also important in this trend as the roles of men and women in the societies are also changing. For the increase in the participation of female or women in the labor force, the level of empowerment and decrease in the rate of gender based discrimination at workplace play important parts. As women are now empowered and determined to pursue what they want to do, they continue to seek for self-advancement and have significant contributions to the society. They are also encouraged to participate more in economic activities as they see they have their own economic value. Over the past 20 years the proportion of adult women who are economically active has risen, while that for men has declined (Institute for Employment Studies 1995). This increase in participation in the labor force by women can be attributed to the changing working patterns of women with children. In Figure 2, the economic activity rates by women and men are shown. The curve for participation of men is in downward direction while the curve for women is shifting upward over the years. FIGURE 2. ECONOMIC ACTIVITY RATES BY GENDER Source: Employment Gazette, April 1994 While the UK economy experienced ups and downs in the past, it has shown signs of recovery. UK Gross domestic product contracted by 0.6 per cent in the fourth quarter of 2010, revised down from the previously estimated fall of 0.5 per cent as reported by the Office for National Statistics (2011). In the fourth quarter of 2010, the GDP is at 1.5 per cent higher than in the fourth quarter of 2009. Figure 3 presents the GDP growth rate of United Kingdom from year 2000-2010 FIGURE 3. GDP GROWTH RATE (2000-2010) The change in women participation in the economic activity can affect the GDP of the economy. From the separate graphs for each indicator, we can see that there is a direct link between the two. With the increase activity of women in the society resulting to economic value, the GDP or output can be increased. But this effect is much clearer if the labor force participation rate of men is unchanged. Because the decrease in the labor force participation rate of men is cancelled out by the increase in the labor force participation rate of women. GDP is a product of the quantity of labor inputs and labor productivity. If a measure of well-being that includes time spent working in the home and taking leisure is to be considered, a change in this measure can affect the GDP. The working hours is a variable to labor input but taking leisure is part of human development, so if the working hours is reduced the GDP is also negatively affected. However, if the reduction in working hours is transformed into higher level of labor productivity like skills and competencies, the change in GDP will be positive. BIBLIOGRAPHY Read More