Living Standards & Development Indicators
Economic Development
The syllabus asks for the reasons living standards and income distribution differ both between countries and within a single country. The living-standards half of that bullet is covered above. Income is the other half: it is rarely shared out evenly within a country, and how unequally it is shared shapes the living standard of the typical person.
Income within a country is distributed unevenly for several reasons.
- Differences in skills and education. Workers with scarce, highly valued skills command much higher wages than those with few qualifications.
- Differences in wealth ownership. Households that own property, shares or businesses receive income from those assets on top of any wages, widening the gap.
- Unemployment and ill health. Households with no earner, or with members unable to work, fall to the bottom of the distribution.
- The tax and benefit system. Progressive taxes and state benefits narrow the gap; a system that taxes the poor heavily and spends little on transfers widens it.
A useful summary measure is the , a score from 0 (everyone has an equal income) to 1 (one person has all the income). You are not required to name it at IGCSE. Two countries with the same GDP per head can have very different Gini coefficients, and the one with the more even distribution usually has the higher typical living standard, because the average is not pulled up by a wealthy few while most people earn little.
Common exam question
Reading a table of income shares
Question: Use a table of the share of income going to each fifth of households, over two years or across countries, to judge how equal the distribution is (1 mark, multiple choice).
Set in 2 of the 13 multiple-choice papers. Each group is always a fifth of households, so changing shares never mean more households joined the top group. Income has become less equal when the top fifth's share rises and the bottom fifth's falls. It is most equal where the shares sit closest to 20% each: a country whose top fifth gets 40% and bottom fifth 10% is more equal than one at 55% and 4%.
Shares are percentages of each country's own income and show nothing about how much anyone earns: a smaller share for one country's poorest fifth does not make them poorer than another country's, and shares alone cannot show absolute poverty. When an option groups two fifths, add their shares before comparing.