Edited by Edward N. Wolff
Chapter 2: Using Expenditures to Measure the Standard of Living in the United States: Does it Make a Difference?
2. Using expenditures to measure the standard of living in the United States: does it make a diﬀerence? David S. Johnson1 INTRODUCTION The question ‘Are you better oﬀ than you were four years ago?’ and pressures such as ‘keeping up with the Joneses’ reﬂect concerns with the standard of living or economic well-being. People are concerned about the change in their own level of well-being and the level of their well-being relative to that of others. Addressing these concerns requires dealing with fundamental issues in measuring the standard of living – making intertemporal and interpersonal comparisons of well-being. In addition, addressing these concerns requires choosing the method used to measure the standard of living. The most widely used measures of the standard of living or economic well-being are derived by the Bureau of the Census using before-tax cash income for families, and include the poverty rate, the median income and the Gini coeﬃcient. These statistics show a U-turn in the standard of living beginning in the early 1970s as shown in Figure 2.1; between 1959 and 1973 poverty fell (and real median income rose), and after 1973 poverty began to increase (and real median income remained fairly ﬂat). These statistics, however, also suggest that there has been a recent improvement in the standard of living. Currently, there is a debate in the literature about which economic resource (for example, income, consumption, or wealth) should be used to measure economic well-being (see Jorgenson 1998; Triest 1998). In his...
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