Standard of living in the European Union

Wawrzyniak, Dorota Article Standard of living in the European Union Comparative Economic Research. Central and Eastern Europe Provided in Cooperation with: Institute of Economics, University of Łódź Suggested Citation: Wawrzyniak, Dorota (2016) : Standard of living in the European Union, Comparative Economic Research. Central and Eastern Europe, ISSN 2082-6737, De Gruyter, Warsaw, Vol. 19, Iss. 1, pp. 141-155, https://doi.org/10.1515/cer-2016-0008 This Version is available at: https://hdl.handle.net/10419/184385 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0 Comparative Economic Research, Vol ume 19 , Number 1 , 2016 10.1515/cer-2016-0008 DOROTA WAWRZYNIAK* Standard Of Living In The European Union Abstract The European Union countries are diversified in terms of the standard of living of the population. The reduction of disparities in the standard of living, along with the elimination of the negative phenomena related to social exclusion form an EU policy priority. In this context, the aim of this article is to compare the standard of living in the various European Union countries and to determine Poland’s position in the ranking. In the study, countries with a similar standard of living of their populations were grouped as well. The analysis was based on 10 variables describing the standard of living in the EU-28 countries and was conducted with the use of the development pattern method proposed by Z. Hellwig. According to the results of the research, the standard of living is the highest in Austria, Finland, Germany and Sweden, whereas it is the lowest in Spain, Malta, Croatia and Romania. Poland ranks relatively low among the European Union countries (20th place). Keywords: standard of living, European Union, multidimensional comparative analysis * Ph.D., University of Łódź, Faculty of Economics and Sociology, Department of Economic Mechanisms, e-mail: [email protected] 142 Dorota Wawrzyniak 1. Introduction In recent years there has been a growing interest in issues related to the standard of living and the quality of life. This interest is manifested not only by the representatives of the scientific community, but also among politicians and the public. The above-mentioned subject area is present in the public debate and is included in both national and international documents. Issues related to the standard of living and social cohesion are also discussed in the sustainable development context. Reducing disparities in the standard of living and eliminating the negative phenomena associated with social exclusion form a priority of the EU policy. The overall aim of the renewed European Union Sustainable Development Strategy adopted in 2006 was “to identify and develop actions to enable the EU to achieve continuous improvement of quality of life both for current and for future generations, through the creation of sustainable communities able to manage and use resources efficiently and to tap the ecological and social innovation potential of the economy, ensuring prosperity, environmental protection and social cohesion” (Renewed EU..., p. 3). According to the latest European Union strategy “Europe 2020: A strategy for smart, sustainable and inclusive growth” one of the priorities is “inclusive growth – fostering a high-employment economy delivering economic, social and territorial cohesion” (Europe 2020: A strategy…, p. 10). As reflected in the document, the Europe 2020 Strategy “is about more jobs and better lives” for European citizens (Europe 2020: A strategy…, p. 2). In this context, the purpose of this article is to compare the standard of living in the European Union countries and to determine Poland’s position in the ranking. Due to the fact that the concept of standard of living is a complex phenomenon, i.e., is characterized by a set of variables that present its various aspects, the research was conducted with the use of one of the multidimensional comparative analysis methods. The analysis covers all 28 European Union member states (the EU-28). The set of diagnostic features applied in the research was determined by the availability of data and the statistical requirements. In the final analysis, ten out of 20 potential variables representing various aspects of the standard of living were used. The structure of the article is as follows. The next Section 2 briefly reviews definitions of the term “standard of living”. Section 3 describes the development pattern method proposed by Z. Hellwig, which was applied in the research. It enumerates variables used in the analysis and provides a brief description of each of the indicators characterizing the standard of living of the population in the European Union countries. Section 4 presents the results of the analysis. The paper closes with a summary of its results. Standard Of Living In The … 143 2. Standard of living of the population – theoretical issues The European Union countries are diversified in terms of the standard of living of their populations. This results from, among other things, the varied overall socio-economic development. However, the standard of living is not a directly observable category. It is an interdisciplinary, complex concept, and is defined in various ways. According to the United Nations commission of experts (of 1954), the standard of living includes “the totality of the actual living conditions of people, and the degree of satisfaction of their material and cultural needs through the stream of chargeable goods and services and also those coming from social funds” (Pawełek 2004, p. 16). As indicated in the literature on the subject, this definition of the standard of living became the foundation for many of the other definitions of the concept. In accordance with the oft-quoted definition by A. Luszniewicz (1982, p. 13) “the degree of meeting material and cultural needs of households executed by streams of chargeable goods and services and gratuitous funds of social consumption and natural use” should be understood as the standard of living of the population in the given unit of time and in a given unit of space. The author named seven groups of material and cultural needs: food, housing, health care, education, recreation (leisure time activities), social security, and financial security (Luszniewicz 1982, p. 20). Cz. Bywalec and S. Wydymus (1992, p. 669) understood the standard of living as “the degree of satisfaction of a population’s needs resulting from the consumption of man-made material goods and services and getting benefits from the natural and social environment.” It should also be noted that although in the literature on the subject there are many definitions of the terms “standard of living” and “quality of life,”1 according to M. Johann (2005, p. 11) there are no clear definitions which distinguish between these two concepts. Some researchers even regard these terms as synonyms (Bywalec, Wydymus 1992, p. 669). However others emphasise differences e.g., A. Lipeta (2000), Cz. Bywalec, S. Wydymus (1992), T. Słaby (1990). According to T. Słaby (1990, p. 8) who is often quoted by various authors, “standard of living defined as a degree of meeting material needs refers to the basic needs in the hierarchy of human needs (physiological needs), whereas quality of life includes all those elements of human life which are related to the fact of human existence, being somebody recognised and feeling various emotional conditions resulting from, e.g., the fact of having a family, colleagues, and friends”. In this approach 1 A review of the definitions used in the literature can be found in, for example: Pawełek (2000, pp. 12–23; 2004, pp. 11–21), Johann (2005, pp. 11–16), Grzega (2012, pp. 15–25). 144 Dorota Wawrzyniak the standard of living is objective, as opposed to the subjective nature of the quality of life, which is related to feelings of people regarding their degree of satisfaction with their existence. T. Słaby confirms this by stating that the standard of living should be determined on the basis of objective indicators, while the quality of life – subjective ones. In this study only objective indicators are used to describe the standard of living in the European Union countries. 3. Methodology of the research and data The “standard of living” analysed in this article is a complex phenomenon, and thus should be described by a set of variables that present its various aspects. For this reason the development pattern method proposed by Z. Hellwig, which is one of the multidimensional comparative analysis methods, was used to compare the standard of living in the various countries of the European Union. This method enables researchers to compare and arrange objects (in this case countries) from “the best” to “the worst” by creating an aggregate indicator (synthetic variable), which constitutes the basis for ordering the researched objects with respect to a multi-characteristic phenomenon. The development measure calculated in accordance with the development pattern method proposed by Z. Hellwig in 1968 is a synthetic variable often applied in practice (see Ostasiewicz 1999, p. 113). The process of its construction begins with the determination of the observation matrix elements X = [xij], that is, the values of variables ( j = 1, 2, ..., m) for particular objects (i = 1, 2, ..., n). In order to make diagnostic variables comparable by eliminating various units of measurement and different ranges of variation, the process of standardisation is applied according to the formula: , S xx z j jij ij   (1) where: xij – the value of variable j for object i, j x – the arithmetic mean of variable j, Sj – the standard deviation of variable j. Standard Of Living In The … 145 The next step is to determine the so-called development pattern P0 with coordinates [z01, z02, ..., z0m], which are calculated in accordance with the rule: ,,,2,1;,,2,1 ,if,)(min ,if),(max 0nimj Djz Sjz z ij i ij i j          (2) where: S – a set of stimulants, i.e., such diagnostic variables whose high values are desirable from the point of view of the examined phenomenon, D – a set of de-stimulants, i.e., such diagnostic variables whose high values are undesirable from the point of view of the examined phenomenon. Subsequently, the Euclidean distance of each object from the development pattern is calculated by the formula:   .,,2,1, 1 2 )00 nizzd m j jiji    (3) The synthetic measure is finally defined as follows: ,,,2,1,1 0 0ni d d zi i (4) where: ,2 000 Sdd  (5) , 1 1 00    n i i d n d (6)  .) 1 1 2 000    n i idd n S (7) The measure constructed in such a way usually takes values within the interval [0,1]. The closer its value is to 1, the more similar the object is to the pattern encompassing the best values of the variables. A negative value of the development measure may occur when the development of a given object is definitely weaker than the development of other objects, and when the number of studied objects is high. This inconvenience of the measure may be eliminated by applying not two, but three standard deviations S0 in the formula (5) (Nowak 1990, p. 89; Zeliaś 2000, p. 93). 146 Dorota Wawrzyniak The selection of indicators describing the standard of living in the EU-28 countries was determined by the availability of data. In most cases, the collected information is for the year 2012. However, due to the lack of complete data for that period, for variables X34 (medical doctors per 100 thousand inhabitants) and X35 (available beds in hospitals per 100 thousand inhabitants) data from the year 2009 was used, and in case of the variable X41 (food and non-alcoholic beverages expenditure of households as a % of total expenditure) the data from the year 2010 was used. The data sources were: Eurostat, European Commission, World Development Indicators, national statistical offices, and own calculations based on the obtained information. Below the set of 20 potential variables characterizing the standard of living is presented. They are divided into 7 groups, covering: security, education, health care, food, housing conditions, natural environment, transport and communications (variables were denoted by Xij, where i is the group number and j is the variable number in the given group): I. Security X11 – Unemployment rate (in %), X12 – Long term unemployment rate (in %), X13 – People at risk of poverty or social exclusion as a % of total population. II. Education X21 – People aged 30–34 with tertiary education attainment (in %), X22 – Early leavers from education and training (% of the population aged 18–24 with at most lower secondary education and not involved in further education or training). III. Health care X31 – Death due to diseases of the circulatory system (standardised death rate), 2 X32 – Death due to neoplasms (standardised death rate), X33 – Number of infant deaths per 1000 live births, X34 – Medical doctors per 100 thousand inhabitants, X35 – Available beds in hospitals per 100 thousand inhabitants, X36 – Life expectancy at birth – males (in years), X37 – Life expectancy at birth – females (in years). 2 Standardized death rate is the death rate of a population adjusted to a standard age distribution. The use of standardized death rates improves comparability over time and between countries, as they aim at measuring death rates independently of different age structures of populations. Standard Of Living In The … 147 IV. Food X41 – Expenditure of households on food and non-alcoholic beverages as a % of total expenditure. V. Housing conditions X51 – Average number of rooms per person. VI. Natural environment X61 – Share of renewable energy in gross final energy consumption (in %). VII. Transport and communications X71 – Internet users per 100 people, X72 – Fixed telephone subscriptions and mobile cellular subscriptions (including pre-paid accounts) per 100 people, X73 – Number of passenger cars per 1000 inhabitants, X74 – Motorways’ density (length of motorways in km per 1000 km2 of land area), X75 – Railway density (length of lines in use in km per 1000 km2 of land area). The proposed set of potential variables was then verified statistically in order to eliminate diagnostic features with low spatial variation and strongly correlated with others (that is, those being carriers of similar information). The threshold value of the coefficient of variation was set at 0.1 (the level usually used – see Zeliaś 2000, p. 43). This caused the removal from the analysis of two variables: X36 (life expectancy at birth – males (in years)) and X37 (life expectancy at birth – females (in years)). Subsequently, the parametric method proposed by Z. Hellwig was used. As a result of adopting 0.5 as the threshold value of the correlation coefficient, the following variables have been eliminated: X11 (unemployment rate (in %)); X13 (people at risk of poverty or social exclusion as a % of the total population); X31 (death due to diseases of the circulatory system (standardised death rate)); X33 (number of infant deaths per 1000 live births); X51 (average number of rooms per person); X71 (Internet users per 100 people); X73 (number of passenger cars per 1000 inhabitants); X74 (length of motorways in km per 1000 km2 of land area). Thus in the end the analysis was conducted using ten variables, six of which were categorized as stimulants: X21, X34, X35, X61, X72, X75, and four as destimulants: X12, X22, X32, X41. The ranking positions of the European Union countries according to the values of the ten variables used in the analysis are presented in Tables 1 and 2. Table 1 includes variables from groups I–III, and Table 2 from groups IV–VII. In 2012, the lowest long-term unemployment rate (in %) (X12, Security group) was observed in Austria (1.2%), Sweden (1.5%), Finland (1.6%) and Luxembourg (1.6%), whereas the highest rates were in Croatia (10.2%), Spain (11.0%) and Greece (14.5%). For Poland this indicator amounted to 4.1%. giving it 15th place in the ranking. 148 Dorota Wawrzyniak One of the two variables representing the education aspect is people aged 30–34 with tertiary education (X21). Its values ranged from 51.1% in Ireland, 49.9% in Cyprus and 49.6% in Luxembourg through to 39.1% in Poland (15th place) and 23.1% in Croatia, 21.9% in Italy, and 21.7% in Romania. The lowest values of the second variable characterizing education – X22 (early leavers from education and training (% of the population aged 18–24 with at most lower secondary education and not involved in further education or training)) in 2012 were recorded in Slovenia (4.4%), Croatia (5.1%) and Slovakia (5.3%), while the highest values were in Portugal (20.5%), Malta (21.1%) and Spain (24.7%). Poland ranked in the high 5th position, with the rate of its early leavers from education and training being 5.7%. Referring to the variables from group III (Health care), it can be seen that in terms of the standardised death rate due to neoplasms (X32), Cyprus (212.9), Finland (230.9) and Greece (247.5) were ranked highest among the European Union countries. At the bottom of the ranking were: Denmark (322.7), Croatia (342.7) and Hungary (367.7). Poland, with its indicator of 313.5 was in the very low 24th position. Taking into consideration the number of medical doctors per 100 thousand inhabitants (X34), the best position among EU-28 countries were attained by Greece (611.8), Austria (467.7) and Italy (409.8), while the worst situations were noted in Slovenia (241.0), Romania (225.7) and Poland (217.1). The number of available beds in hospitals per 100 thousand inhabitants (X35) was the highest in Germany (823.9), Austria (765.9) and Hungary (714.4), and the lowest in Ireland (327.4), Spain (318.7) and Sweden (275.9). For Poland the indicator amounted to 665.3 available beds in hospitals per 100 thousand inhabitants, putting it in 7th place with a value similar to the one recorded in France. The household expenditures on food and non-alcoholic beverages (as a % of total household expenditures; i.e. X41, the Food group) in 2010 were the lowest in Luxembourg (constituting 8.5% of total expenditure), the United Kingdom (9.1%) and Ireland (9.7%), whereas they were the highest in Poland (19.6%), Lithuania (24.2%), Croatia (25.6%) and Romania (27.5%). In terms of the share of renewable energy in gross final energy (X61, Natural environment group) Sweden (51.1%), Latvia (35.8%) and Finland (34.5%) were the leaders among the European Union countries, while the United Kingdom (4.2%), Luxembourg (3.1%) and Malta (2.7%) were ranked at the bottom. Poland, with its indicator of 10.9%, ranked in 19th place. Transport and communications is represented by two variables: X72 (fixed telephone subscriptions and mobile cellular subscriptions (including pre-paid accounts) per 100 people) and X75 (railway density). Taking into consideration the former, the best positions among the EU countries were in Latvia (211.5), Austria (200.5) and Luxembourg (196.3). The worst situations were in: Cyprus Standard Of Living In The … 155 World Development Indicators (2015), World Bank, http://data.worldbank.org/data-catalog/worlddevelopment-indicators/ (accessed: 30.05.2015). Zeliaś A. (red.) (2000), Taksonomiczna analiza przestrzennego zróżnicowania poziomu życia w Polsce w ujęciu dynamicznym, Wydawnictwo Akademii Ekonomicznej w Krakowie, Kraków. Streszczenie POZIOM ŻYCIA W KRAJACH UNII EUROPEJSKIEJ Unia Europejska obejmuje kraje o zróżnicowanym poziomie życia ludności a wyrównywanie dysproporcji w poziomie życia i eliminowanie negatywnych zjawisk związanych z wykluczeniem społecznym stanowią priorytet realizowanej przez nią polityki. W tym kontekście celem artykułu jest porównanie poziomu życia w krajach Unii Europejskiej oraz określenie miejsca Polski w skonstruowanym rankingu. W opracowaniu utworzono także grupy państw o podobnym poziomie życia. W analizie przeprowadzonej przy wykorzystaniu metody wzorca rozwoju Z. Hellwiga użyto 10 zmiennych opisujących poziom życia w krajach UE-28. Zgodnie z wynikami przeprowadzonego badania poziom życia jest najwyższy w Austrii, Finlandii, Niemczech i Szwecji, zaś najniższy w Hiszpanii, na Malcie, na Cyprze i w Rumuni. Polska znajduje się na stosunkowo odległej 20. pozycji. Słowa kluczowe: poziom życia, Unia Europejska, wielowymiarowa analiza porównawcza