Does the level of National income give an accurate picture of the economic and social wellbeing of the population? Give reasons to support your answer?

• Note: National income figures are not designed to assess welfare or the wellbeing of citizens. It was designed to measure production capacity and economic growth. However, when National figures are high, it means that per capita income will also be high. So using national income figures to measure standards of living is the same as using per capita income to measure standards of living.

The problems associated with the per capita are

• Per capita income does not consider the level of illegal activities in an economy. National income figures may be low when people are enjoying high standard of living
• It does not consider the type of good produced. A country may portray high per capita income figures when than nationals are experiencing low standards of living.
• National income figures may be high when majority of the people are unemployed, this therefore does not designate high standards of living
• National income figures may be high when most of people’s income is taken in form of taxes which lead to low standards of living.
• National figures may be high when people are over working, hence low standards of living.
• National income figures shoot up during inflation which does not depict high standards of living due to high cost of living.
• National income figures do not show the distribution of income. The figures may be high when the income is unevenly distributed and majority have low standards of living.  A rise in inequality leads to a rise in societal discontentment and increased polarization.
• The non-market output increase national standards of living yet are not portrayed in national income figures.
• A country can have high levels of national figures when actually it is facing political unrest which does not mean that people are enjoying high standards of living.
• National income figures do not discount the negative impact growth may cause towards health and environment which have negative impact to standards of living such as pollution and environment degradation.
• National income figure do not reflect information and entertainment that drive the growing service economy providing positive influence on the quality of life.