The Wellbeing Indicator measures all aspects of prosperity

Economic growth is not the only thing that determines Dutch people’s wealth. Aspects such as health, income, education, safety, environment and happiness are also important. Rabobank and Utrecht University have developed the Wellbeing Indicator, which measures the influence of all of these factors together.

What is prosperity and well-being in the Netherlands?  Traditionally, economists measure prosperity on the basis of economic growth using the gross national product (GNP) as a benchmark. ‘However, prosperity largely concerns people and thus their sense of well-being,’ says Hans Stegeman of RaboResearch. ‘This concerns matters important to them, such as health, safety, happiness or job security.

The GNP is therefore not a good benchmark for people’s broader prosperity. The originators of the GNP, such as Simon Kuznets, have long said that it is not a good measure of prosperity growth. GNP is nothing more than a measurement of the value of goods traded at market prices over a certain period within a defined area.’

More than a year and a half ago, Rabobank and Utrecht University started working together on developing the Wellbeing Indicator. This is a measure that gives insight into the development of prosperity in the Netherlands. It’s the first index to give a complete picture of Dutch well-being by integrating various relevant factors including income, education, health, environment, safety and happiness.

The Wellbeing Indicator is a response to the discussions that have taken place over the past number of years about the development of an index for measuring prosperity in the broad sense. The Stiglitz Commission report has had a strong influence on the discussion in recent years. This Commission on ‘measuring economic performances and social progress’ was established in 2008 on the initiative of President Sarkozy. The report pointed out the limitations of the GNP and suggested alternative indicators that take account of social well-being and the sustainable, ecological and social character of economic development. The Lower House of the Dutch Parliament recently brought out an extensive report with the main recommendation that the Netherlands should also have a ‘well-being monitor’.

The Wellbeing Indicator seems to reflect rather different trends to the GNP per capita, and did so especially during and after the 2008 financial crisis. The prosperity of Dutch households has barely risen despite the economic growth in recent years.

In the period leading up to the great 2008 financial crisis, both the gross national product (in figure below BBP) and the Wellbeing Indicator (in figure below BW index) followed a similar trend in development. Thereafter, the differences became obvious.

In 2009, the GNP decreased sharply, while the Wellbeing Indicator remained roughly the same. During that time, many companies still retained their employees and salaries kept increasing, so that the material prosperity and jobs dimensions decreased only slightly. At the same time, other dimensions such as health and safety continued to increase in the years after 2009.

It was only in 2013 that the Wellbeing Indicator showed a decrease. In that year, unemployment increased sharply. At the same time, the subjective well-being of people also decreased, particularly due to a decrease in satisfaction with their lives. This may be due to the consequences of the crisis and the associated uncertainty that slowly became more noticeable for most Dutch people. The housing dimension decreased more rapidly after 2013: both renters and buyers indicated that they were less satisfied with their homes. For buyers, this was related to falling house prices, which left many people in financial difficulties. For renters, higher rent prices played a role.

Three factors have developed in a remarkably positive way over the last 12 years: the environment, health and safety. Among other things, this is attributable to an increased life expectancy, increased biodiversity and a decline in emissions, including particulates. Stegeman: ‘Policy-makers therefore have a clear task ahead of them in developing a vision for increasing prosperity, not just to look at economic growth but also to take into account all of the dimensions of prosperity.’