Why our wellbeing is a measure of how the real economy is doing
Andrew Webb, managing director, Webb Advisory
The year has opened with a sense that we are heading towards a new global economic downturn. Oil prices are plummeting and stock market performance is now being referred to as 'the panic of January 2016'.
As yet, the turmoil in the markets has not bled into the real economy but, as I write, the mood music emanating from the World Economic Forum meeting in Davos seems to suggest that 2016 will be a 'bumpy' year for financial markets and business performance.
Uncertain economic times such as this usually see a flurry of revised growth forecasts. What does this mean for GDP and, the question I get asked most, when are interest rates going up? (I don't see any need for interest rates to rise during 2016).
For some time now I have been thinking about how we measure economic progress. Traditionally, we have been in thrall to one key measure of how we are doing - GDP. Or, more bluntly 'are we bigger?' this year than last year? I have read countless strategy papers (and written a few) which can typically be boiled down to 'if you do X,Y and Z, GDP will be bigger than it was and we can all pat ourselves on the back'. Unfortunately, the bluntness of this approach misses key nuances.
Yes, our economic output is greater this year than it was 20 years ago but the most deprived areas of Northern Ireland today are the same areas that were the most deprived decades ago and we appear to be standing still in the long-held aim to close the GDP per worker gap with the rest of the UK.
Is it time to move beyond GDP and add a broader range of measurement to how we are performing as a society? This might focus our minds on the type of place we want and force a conversation about what success looks like. It also seems like an obvious role for our new councils under their community planning remit.
There is a large and increasing body of work to support the view that measuring GDP is but one part of the story. In fact, as far back as the 1970s, some economists were making the case that GDP and 'life satisfaction' did not go hand in hand.
The financial crises and subsequent economic crash that we are only now emerging from brought a renewed vigour and evidence to support the limitations of GDP as a measure of economic progress. Flowing from this is a growing acceptance that 'wellbeing' is a more useful concept, and capturing economic, social and environmental factors can lead to policy decisions that ultimately aim to improve outcomes for everybody.
In light of this, I have been impressed by the work that the Carnegie UK Trust's Round-table on measuring wellbeing in Northern Ireland has taken the lead on. Since launching last autumn, it has gained considerable interest and I would be surprised not to see wellbeing feature prominently in our next Programme for Government.
Wellbeing moves beyond that blunt measure of 'are we bigger?' and considers how society is progressing more broadly, rather than just using economic indicators. It also asks us to focus on how people's lives are improving. A recent publication from NISRA (Northern Ireland Statistics & Research Agency) presented a broad range of measures to assess Northern Ireland's well-being, from health and education to personal finances and the environment, and presented a detailed picture of where we are as a society. As an economist, I am more used to Northern Ireland featuring at the wrong end of league tables but, when it comes to a key measure of wellbeing - personal happiness - Fermanagh and Omagh came first in the league of the UK's happiest places.
NISRA also found there were relatively fewer crimes against the person in Northern Ireland than in England and Wales.
That said, it is not all positive news; both males and females here can expect fewer years of living in good health than those in the rest of the UK. Around one-fifth of individuals in Northern Ireland live in households with less than 60% of median income, and among the population of working age, a higher proportion here have no qualifications.
Looking at wellbeing gives us a far deeper understanding of where we are as an economy and society. Later this year, our politicians will gather to agree a new Programme for Government. I look forward to seeing how it weaves wellbeing into its proposed actions.