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Standard of Living: Meaning, Factor and Other Details

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Meaning:

Standard of living’ refers to the necessaries, comforts and lux­uries which a person is accustomed to enjoy.

In other words, standard of living of the people means the quantity and quality of their consumption.

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We know that if a person satisfies some wants in a particular manner long enough, they recur and become habits.

He must have those commodities and services; over and over again otherwise he would not feel happy. Such things become his daily requirements and constitute what has been called his standard of living. They include his food, dress, house, entertainments, etc. Standard of living is, in short, his mode of living.

The standard of living of a person is not determined only by himself or according to his own whims and desires. He has also to consider what society expects of him. It is thus a compromise between what he himself likes and what the society expects.

Standard of Living and Standard of Life:

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A distinction is sometimes made between standard of living and standard of life. Standard of living , refers to our usual scale of expenditure, the goods we consume and the services we enjoy, our attitudes and values. Standard of life is a much wider term. It refers to one’s ideals in life. It includes a person’s expenditure on his non-material requirements. “Simple living and high thinking” is a common axiom. “Simple living” hints at a low standard of living, but “high thinking” refers to a high standard of life. Mahatma Gandhi had a low standard of living but a high standard of life.

Factors Determining Standard of Living in a Country:

A major objective of the government of a country is to provide good living to i s people. But different countries of the world provide different levels of living to their people. In fact, there are marked inequalities in the standards of living of the people in different countries of the world. On the one hand, there are advanced countries like the U.K., the U.S.A., Canada and the countries of Western Europe where standards of living are very high. Therefore, these countries have been called affluent societies.

On the other hand, there are under-developed countries like India, Pakistan, China, Burma, etc., where standard of living of the people is extremely low. The extent of differences in the levels of living between the U.S.A. and India can be known from the comparison of per capita income in both countries as it is the per capita income on which the standard of living of a people primarily depends. According to the latest 1984 World Development Report, the per capita income of the U.S.A. is 3.16 dollars, while in India the per capita income is only 260 U.S. dollars, i.e. one fiftieth of that of the U.S.A.

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The following are the main factors on which the standard of living in a country depends:

Level of National Income or Output:

The fundamental reason for the differences in the levels of living between different countries is the difference in their levels of national income. The level of national income depends upon the total volume of production in the country. Those countries having higher national income or output enjoy higher standard of living, while the countries having lower national income or output have lower standard of living. The main reason why standard of living is much higher in the U.S.A. than in India is that the level of national output in the U.S.A. is much higher than that in India.

Now the question arises:

Why do some countries produce more than others? This brings us to the question of levels of productivity.

Level of Productivity:

The total amount of goods and services which a country is able to produce, and hence the standard of living it can provide to its people, depends upon the levels of productivity in different branches of economic activity such as agriculture, industry, transport, etc. The higher the productivity per person engaged in agriculture, industry, etc., the higher will be the national output and the standard 01 living of the people. Difference in productivity is the major cause of differences in standards of living between different countries.

For example, in 1951, average productivity per person engaged in agriculture in the U.S.A. was 2,722 dollars, while it was only 147 dollars in India. (Productivity has been expressed and measured in U.S. dollars in order to have a comparative view). This productivity per person engaged in agriculture was 2,336 dollars in Canada and 1,806 dollars in the U.K.

Further, average productivity per person engaged in manufacturing was 5,488 dollars in the U.S.A., 2,815 dollars in Canada, 1,332 dollars in the U.K. and only 320 dollars in India. The relative position is not much different even today.

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In advanced countries, a farmer or a worker works with greater amount of capital equipment like machinery in a productive process. Developed countries have highly mechanized their processes of production. On the other hand, in under-developed countries, farmers in agriculture and workers in factories work with small capital equipment.

Moreover, in developed economies not only capital per head is greater but the techniques of production used are much superior to those employed in under-developed countries. In other words, developed countries make use of advanced technology in the production of goods and services, while the under-developed countries are technologically backward. No wonder that productivity per person engaged in under-developed countries is much lower than that in advanced countries.

Terms of Trade:

Another factor which accounts for the differences in the levels of living between different countries is the rate of exchange between goods exported and goods imported. The rate of exchange between exports and imports is called the terms of trade. The terms of trade show how much of the goods a country imports can be obtained by a unit of the goods it exports. The terms of trade can be measured by taking the ratio of price-level of its exports to the price-level of its imports.

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Likewise, the average standard of living in a country depends not only on the physical productivities of its people but also on the prices of goods it exports and the prices of goods it imports (i.e., terms of trade). If the terms of trade are more favorable for a country, it can import comparatively larger amount of goods for a given amount of exports and hence its standard of living will be higher.

Size of Population:

Still another important factor which determines the standard of living of the people of a country is the size of its population. Given the total national income or output of a country, the greater the size of its population, the lower will be its average standard of living. It is the per capita income which in fact determines the average standard of living in a country.

The per capita income of a country is determined by the total national income and the size of its population. Thus, the difference in the size of population also accounts for the difference in the standards of living between people of different countries.

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The higher standard of living of the American people is due not only to the higher level of national income and productivity but also to the comparatively smaller size of American population. The standard of living in India is low due both to the lower level of national income and to the larger size of its population.

Distribution of National Income:

Another determinant of the standard of living of the people of a country is the distribution of national income among the population. If there is large inequality in the distribution of income, then the standard of living of a few rich people will be very high, while the standard of living of the masses of the people will be extremely low.

Even per capita income of a country does not indicate the true picture about the standard of living in general, because per capita income of a country is after all an average income. Some people may enjoy income much higher than this and the majority may be getting much lower than this.

General Price Level:

Another factor determining the standard of living of a people is the general price level in the century. Given the national income, the standard of living of the people will be lower when the price at high and higher when the prices are low. Different price levels prevail in different counties. This also accounts for the differences in standards of living of the people between different countries. Other things being equal, if the price level in country A is higher than in B, the standard of living will be lower in A than in B.

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Level of Education:

Another factor responsible for the differences in stan­dards of living is the difference in the level of education. Educated people tend to have higher standard of living than the uneducated. You cannot expect a higher living standard from the illiterate and ignorant people. Even if the illiterate and uneducated people happen to have large incomes, they would either hoard them or squander them in useless social ceremonies or by indulging in evil habits such as drinking, gambling, etc.

Factors Determining Individual Standard of Living:

The following are the main factors on which the standard of living of an individual or a family depends:

Income:

The most important factor on which the standard of living of a person depends is his income. The amount of necessaries, comforts and luxuries which one enjoys are very largely governed by his income. A poor man’s standard must be very low and that of a millionaire very high. In this monetized world, it is the purchasing power or earning power of a person which would determine his standard of living.

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Size of the Family:

Coupled with a person’s income is the size of the family which determines has standard of living, it a man has a large family, the family income will be thinly spread over the family and the standard of living will be lowered. Other things being equal, the scanner the size of the family, the higher is likely to be the standard of living. This underlines the importance of family planning.

Family Tradition:

A person inherits a certain standard of living from his parents. In most cases, such a standard of living will be maintained somehow. Departure from the traditional standard of the family is not easy.

Education, Tastes and Temperament:

A person’s standard of living is also affected by his education, personal tastes and temperament. These factors would modify the standard that a person may have inherited from his family. He makes every effort to maintain it or improve upon it.

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Social Customs and Conventions:

They are also bound to affect a person’s standard of living, since he lives in a society and normally follows the norms and practices obtaining in it. For reasons of his own and his family izzat (honour), he does not like to lag behind in observing such norms and conventions in social ceremonies like marriages.

General Price Level:

For determining a person’s or a family’s standard of living, it is not enough to take into account only his money income, but what the income is capable of buying in terms of goods and services, i.e., person’s real income is more important for this purpose. That depends largely on the price level, particularly that of the goods and services which enter into that person’s consumption. These are some of the factors on which a person’s or a family’s standard of living depends.

Causes of Low Standard in India:

Country:

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For instance, standard of living of the people in England is much higher than that in India. Certain things are necessary in England which may be a luxury in India, e.g., overcoat or heating arrangements in living rooms. Cli­matic factors and the national income are the two main determinants of stand­ard of living in a country. From the factors explained above the in the foregoing section, it is quite clear that the standard of living in India must be low.

The following are the main causes:

Low National Income:

India has comparatively low national income. The national income of India compares very unfavorably even with some Asian and African countries. When the national income is low, the standard of living cannot be high.

Huge Population:

Relative to its resources, the country is over-populated. It has crossed the optimum size of population. This brings down the per capita income which is the most important single factor that determines the standard of living.

Under-Development:

Economically India is under-developed in agricul­ture. Trade, industry, transport, banking, etc. That is why the country’s output is low and the national income is low, resulting in a low standard of living.

Climatic Factor:

Indian climate is such that our requirements in the matter of food, clothing and shelter are small. An average Indian can subsist on a handful of parched grams, his clothing may be scanty and for several months in the year, he can live outdoors. The needs being few, the standard of living is low.

Religious Tradition:

Most people in India nave the other-worldly attitude. Even when they can afford to live well, they will deny their selves the pleasure. A Fakir in a loin cloth, like Mahatma Gandhi, living on frugal diet appeals more to the Indian mind. Simple living and high thinking seems to be the motto of the most.

Social and Family Obligations:

Social conventions compel us to spend heavily on our children or even on donations to others children’s marriages liven our funerals are very expensive. Unless one stints throughout life, one cannot hope to discharge properly these social obligations. No wonder that an average Indian is condemned to a life of poverty and austerity.

Remedies:

Efforts are being made in India now to raise our standard of living.

The following are some of the measures adopted:

(i) Economic Development:

Our Five-Year Plans are designed to bring about rapid economic development. This will raise the national income and, therefore, standard of living.

(ii) Family Planning:

Side by side, curbs are being put to the torrent of babies. Family planning programmes are being pursued on a nation-wide scale. This will reduce the size of the families and make available larger share of income per head. The standard of living will therefore rise.

(iii) Spread of Education:

Educational facilities are being extended so that people learn the value of richer and fuller life. This also helps in raising the family income.

(iv) Improvement in the Means of Transport and Communication:

We are now being brought closer to people who have a higher standard of living and we unconsciously imitate them. This is a Powerful influence in raising our standard of living.

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