LIVING standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy.
The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans.
It says that GDP per head in Britain will be £23,500 this year, compared with £23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy’s record run of growth and rising incomes going back to the early 1990s.
In those days, according to Oxford Economics, Britain’s GDP per capita was 34% below that in America, 33% less than in Germany and 26% lower than in France. Now, not only have average incomes crept above those in America but they are more than 8% above France (£21,700) and Germany (£21,665).
“The past 15 years have seen a dramatic change in the UK’s economic performance and its position in the world economy,” said Adrian Cooper, managing director of Oxford Economics. “No longer are we the ”˜sick man of Europe’. Indeed, our calculations suggest that UK living standards are now a match for those of the US.”
Ever since I lived in Germany for 6 years I’ve pondered how relative living standards are calculated. Back then Germans were supposedly poorer than Americans, but you would never notice the difference in quality of life overall. In some ways Germans were better off than Americans (obviously your beer $ went farther and got better returns) and in others poorer (most Germans had 1 TV per house). But with fewer TVs, who wanted to watch the really boring German state TV stations anyway, except for the football matches which were carried at the gasthaus. But this article has a reflection of the differences between the countries and how you are able to spend your money:
[blockquote] “After the credit-fuelled boom in domestic demand and asset prices, the UK economy now faces a hangover, with slowing credit growth, falling property prices and tightening lending standards,†said Michael Saunders, its UK economist. [/blockquote]
How ‘falling property prices’ would affect per capita income is hard to imagine, but my impression of Europe is that spending money on real estate is expensive. You don’t get much for your money compared to the US, outside of NYC or CA. In fact, the comparison between CA and say Iowa is instructive. Locating in CA will imply radically higher housing costs compared to Iowa. So payrolls tend to be higher as well. Does that higher income result in higher real wealth? I don’t think so, and aggregate comparisons between the US and UK would be similar. On the other hand, in the UK you won’t need a second car so much as in the US for an average family. But this comparison essentially demands overlooking a huge numbers of lifestyle discontinuities which erode the overall value of the comparison as an absolute measure.
Although the standard of living of Britons may have been raised I too call into question how things are measured. Anyone who has ever shopped in a typical English town knows how much more and better the goods are here, and how much larger houses tend to be – and better heated.
I agree about the variables making comparison a bit of a nonsense, but I would like to feed into the equation travel. We Brits have become travel hounds. Two foreign holidays a year, often long-haul. Well, we live on a crowded little island, I grant you, and we get sun-starved. But I read somewhere that only 20% of Americans have passports. Comparatively few ever travel abroad. Of course (as they tell me) there is so much to see in the US as to take a lifetime. But I wonder: do they not travel because of lack of curiosity about other people? Or because of fear? Or because, comparatively speaking, they do not have the means?
Dollar or pound comparisons are infantile. What’s the purchasing power parity?
Adam sez: how much larger houses tend to be [in the US]. Depends where you are. In the Bronx? South Side of Chicago? Trailer homes anywhere? Single-wides (of which I see many in the South West and West of the US)?
Anyway, it reminds me of a joke which takes various forms but which would today come something like this:
All this talk about the economic decline of the US is nonsense. The Americans import much bigger and better Chinese goods than the Europeans..
Terry- I’m not a good example of not traveling, but the US is a huge country and much of North America didn’t require a passport to enter, prior to this year. So Canada, Mexico and the Carribean were accessible via a travel agent’s office or online reservation. There are any number of reasons why Americans don’t learn foreign languages also, but the leading is that [i]they don’t have to do so.[/i]
There is also a “I got my shoes nailed to the floor and ain’t goin anywhere no how” streak to many Americans which I didn’t see in Europe so much. That gets added to the US tendancy for 2 weeks of vacations plus sick leave and you get a trend towards discounting the effective value of international travel.
I’d also observe that some road warriors like me tend to avoid travelling when on leave. Why would I want to see the interior of Hartsfield International Airport except under duress?
Terry T., lots travel to Mexico and Canada and the Caribbean. Pretty much anywhere else is a longhaul flight of at least 6 hours and often MUCH longer. Pretty exhausting stuff.
And also, we do not have the wonderfully cheap array of flights that the UK has. I’m just amazed at the cheap flights folks in the UK can get to Spain, Morocco, the Canary Islands, etc. We just have nothing equivalent in the US. And yes, as others have said, most in the US only get two weeks of vacation a year. Most I know split that up to two or three shorter breaks. That limits travel.
Well, I and my family do have passports and we do travel…Some…But only if there is something we really wish to go see.
This is for numerous reasons.
First, if one grows up in the US, it is a culture shock to go to Europe. There is a culture of smiling, “may I help you” type friendliness in most US towns, (however artificial this might be). To folks used to the business courtesy taught by McDonald’s and Disney to 3 generations of Americans, Europeans come off as being abrupt, unfriendly and rude. (I know they don’t like our manners either, I simply point out that US business friendliness differs from European friendliness).
Second, America has an area and a geography that is easily has large and as varied as is Europe. From my home in the midwest, I can reach Disneyland in Florida, Galveston beach in Texas, the ski slopes of Colorado, the fleshpots of Chicago, Illinois or Los Vegas, Nevada or one of the great national forests in a day’s driving. Or I could take the night train and sleep comfortably and awaken at my destination. Thus, there is no need to go to a foreign country if one wants to either hit the beaches, ski slopes or just about anything else.
Then, we (as with other Americans) have relatively brief holidays. My summer vacation is usually a week, and I take a four day weekend over Spring and Winter break. Since travel to Europe requires a much longer time spent in transit than travel within Europe or within the US, spending one day flying accross the Atlantic, and another in Charles De Gaulle airport in order to spend rapidly depreciating dollars being sneered at by Parisians for three days, before repeating the long journey home does not compare favorably with simply driving south to the beach in the summer, or north to the mountains for skiing, or west or east for other pleasures all of which I can reach in a day.
However as regards the living standards of Americans I agree that Europeans live better. Yes, they have smaller homes, however this is mostly because the tax code in the US encourages most americans to consider their home an “investment” rather than as shelter. (Thus, the larger house is less a sign of a high standard of living, than a peculiar (and not very good) form of savings account). Food and gasoline is cheaper (right now) in the US than it is in Europe, however Americans work far longer hours, and have far less vacation, health benefits and pension benefits, and security in general than Europeans. All in all, I have always thought that the European standard of living (especially with Germany’s mouth watering vacations) beat ours hollow.
Adding a comment here, extremes of weather is a feature of American living. Most Americans who live in the Northern section of the U.S. have to insulate their homes extremely well and pay high prices for heating oil or propane or electricity. Southern half of the country and also much of the north have to use use air-conditioning
I’d question that because the price of living in Britain is unbelievably high.
I understand they say houses in Britain are about 30% overpriced. The average 3 bed house – with little garden – is $400K.
Prices in the UK are so high that the almost-equal GDP, pound for pound, goes much farther in the US. There are many features of living in Europe that are attractive, not least the excellent trains and in-city public transit systems. The areas involved are so much smaller. In northern Europe eating in restaurants is very expensive, while supermarket prices are not so bad.
From the US, travel to Europe takes a full day for the trip and then an adjustment to a five or six-hour time change. It’s harder going east than west. Plus, in recent years, in great part because of the wildly skewed news reporting, some Europeans have regrettably become openly anti-American, and not shy about letting Americans they meet know it. German-speakers have been particularly rude in my recent experience.
Last year I worked in the USA and this year I work in the UK. The value of my salary is comparable, but the purchasing power of the dollar in the USA is greater than the pound in the UK. I own two houses (one in Tennessee and one on the outskirts of Cambridge — if you want a house near Nashville I have one for sale). The Cambridge house is 5/8 the size of the Tennessee house, has a tiny garden compared to three acres of land, yet in dollar terms is valued at about $200,000 or so more. Gas is much more expensive, food varies, books are about the same, clothes are not cheap, a visit to Starbucks or a restaurant is now truly a luxury.
Taxes are higher, but then I don’t need to worry about never being able to fund healthcare and get all sorts of perks for being over sixty. Americans work harder on a day-to-day basis, and have less holiday/vacation time off. There are things that truly irritate me about Britain, but then the same is true of the States, and as a citizen of both countries I can be an equal opportunity complainer about the shortcomings of both!
Quite honestly, when I heard this news on the BBC this morning as I was getting up I tried to make a mental comparison and failed. It is like comparing apples and oranges. I probably have less in the UK than I would in the USA, but I have reached a point in life where it is each day’s experiences that are more important than the size of my bank account or my house, and the experiences so far have been rich.
What I would say on returning to live in Britain after 31 years in the USA is that this country is profoundly more prosperous than it was when I left. However, no matter how much you tell them Brits don’t seem to be able to accept that they are some of the wealthiest people in the world.
I, an American, have lived and traveled in the Middle East and Europe for over 12 years. This is all BS!! Americans live way better than almost everyone else in the world. We have so very much of everything, culturally, materially, spiritually, and are more free than others can even dream about. I like Blair’s statement about judging a country. Just see how many are trying to get in.