LE in the UK are even worse off than the economy’s slump in GDP suggests, according to official data published yesterday that aims to measure our economic wellbeing.
Net national income (NNI) per person – an alternative measure to GDP – has crashed by 13.2 per cent since its peak in early 2008, the Office for National Statistics (ONS) revealed.
While GDP recovered with 2.4 per cent growth between the second quarter of 2009 and the second quarter of this year, NNI per head fell by a further 1.5 per cent.
NNI takes into account both cross-border transfers and capital depreciation. UK residents’ incomes overseas are added, while incomes paid abroad and wear and tear on vehicles, machinery and buildings are subtracted.
The ONS’s paper Measuring National Wellbeing – The Economy, published yesterday, argues that NNI per head is a more accurate measure of living standards than GDP per head. It cites economists Amartya Sen and Joseph Stiglitz – both Nobel laureates – in support of this view.
Using NNI per head, the comparison with previous recessions is stark. In the 1990-1992 recession NNI per head returned to the pre-recession peak 10 quarters into the dip.
In the 1979-1982 recession NNI per head recovered in 13 quarters.
Yet in the second quarter of this year, 51 months after its peak, NNI per head remained over 13 per cent lower than it had been.
GDP per head fell seven per cent during the worst of the crisis, and remains just seven per cent below its peak level due to a lack of overall movement between 2009 and now.
Another measure of economic well-being considered by the ONS was real household actual income (RHAI) per head – which considers the impact of taxes and subsidies on household budgets. This metric gives a less gloomy view than NNI per head, but RHAI is still only marginally above its pre-recession peak. And the recovery is far worse than in the 1990-1992 recession, the only previous recession for which comparable data exists.
“Real national and household incomes have been falling due to a combination of the recession and high inflation,” the ONS said. The report also includes the public debt as a factor affecting national wellbeing.