Spain - Wellbeing

 OECD Better Life Index

Spain ranking - 19th out of 38 countries

What they scored highest in - safety (9.2 / 10)

What they scored lowest in - Income (4.0 / 10)

Spain has a low income with a considerable gap between the richest and poorest and people have a sense of safety and security as Spain's homicide rate is 0.6, lower than the OECD average of 3.7

Something that was expected was the relatively low score for jobs at 4.7 of 10 due to the economic crisis back in 2012 and Spain's difficulty to recover. The percentage of the labour force that has been unemployed for a year or longer is currently at 7.7%, much higher than the OECD average of 1.8%. Spain suffers a high level of structural unemployment. Since the economic and financial crisis. One leading cause is an economy based mostly on tourism and building sectors, as well as lack of industry.

http://www.oecdbetterlifeindex.org/countries/spain/

World Happiness Index

Spain
Overall Rank	Score	GDP per capita	Social support	Healthy life expectancy	Freedom to make choices	Generosity	Perception of corruption
28	6.401	1.231	1.421	1.051	0.426	0.165	0.110

https://en.wikipedia.org/wiki/World_Happiness_Report#cite_note-47 

 

There is a high social support in Spain, people believe that they know someone they could rely on in time of need or in crisis

Happy Planet Index Ranking

15th out of 140 countries

HPI score 36.0

What they scored highest in - Life expectancy (6th of 140 countries)

What they scored lowest in - inequality (22nd of 140 countries)

http://happyplanetindex.org/countries/spain

Spain is ranked fairly high on the Happy Planet Index. This could be due to the fact that this index does not take into account the economic wellbeing of its citizens but their happiness or due to the fact of a false consciousness.

Response to hamzah's question:

Spain’s economy has been recognized as one of the most paramount in the world due to its high exports of goods, however it has been bogged down by multiple crises over the past several years. Economical disasters left the Spanish economy with long-term obstacles that the Spanish government has struggled to overcome. The Spanish economy prospers from a low import and high export method which was initially implemented after the global financial crisis in order to help the country become more profitable. In the first quarter of 2020 Spain's GDP decreased by -0.5% but jumped to 5.9% in the next quarter as the country ramped up its exports further to the point that of Spain becoming one of the world’s top exporters. The exported goods bring in money, increasing its GDP and despite the economic slump due to the pandemic, Spain now seems to be recovering and forecasts are rather optimistic.

France - Wellbeing

 OECD Better Life Index

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France’s ranking - 18th out of 38 countries

What they scored highest in - Work/life balance (8.7/10)

What they scored lowest in - Income (4.4/10)

Figure 2.1 - OECD Better Life Index for France

(http://www.oecdbetterlifeindex.org/countries/france/) 

France ranks well in terms of having a good work-life balance, people feeling safe and a healthy population. 

However, their most alarming issue is their relatively low score of 4.4 for income, the average household disposable income per capita is USD 31,304 a year which is lower than the OECD average of USD 33,604. Interestingly though, this does not mean the whole population is poor, instead, France suffers from a poor distribution of income. The top 20% of the population earn around 4 times as much as the bottom 20%. A potential solution to this would be opting for more progressive taxes i.e) the percentage of income paid in tax increases as incomes increase. This would help the French government achieve one of its microeconomic objectives, a fairer redistribution of income. 

Happiness Index

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France’s ranking - 20th out of 150 countries

Score	GDP per capita	Social support	Healthy life expectancy	Freedom to make choices	Generosity	Perception of corruption
6.664/10	1.268	1.459	1.030	0.514	0.113	0.227

Figure 2.2 - France ranking in 2020 World Happiness Report https://en.wikipedia.org/wiki/World_Happiness_Report#cite_note-47 

France scores lowest in terms of its generosity, this is not surprising considering in the OECD better life index, France suffers from low scores for income and also a poor distribution of income. Hence many may feel a lack of generosity typical of a capitalist society where the rich tend to get richer as the poor get poorer with little support. 

Happy Planet Index Ranking

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France ranking - 44th out of 140 countries, HPI score 30.4

What they scored highest in - Life expectancy (10th of 140 countries)

What they scored lowest in - Ecological footprint (111th of 140 countries)

Figure 2.2 - Happy Planet Index for France 

(http://happyplanetindex.org/countries/france)

France ranks highly for its lack of inequality, good wellbeing and high life expectancy so it was fairly surprising that it ranked 44th out of 140 countries contradictory of its high rankings in these variables. 

What hurts France the most is its poor ecological footprint, ranked 111th of 140, France joins many first world countries culprit of having alarmingly high ecological footprints. France consumes 5.1 global hectares per person, this high value is synonymous for many first world countries who due to their wealthy economies consume relatively more goods and services then poorer nations and so have a greater economic footprint per individual.  

That is to say, even if a poorer nation may have a larger population and so consume more goods and services overall, the amount of goods and services per capita divides total consumption by population to give a more accurate representation of a country's ecological footprint. The average person in a first world country will likely consume more than the average person in a third world country. 

This index would prove the reason why France should focus less on its GDP and more on its ecological footprint. GDP represents the real output of a country, if a country prioritises GDP growth a byproduct would be the negative externalities associated with both producing and in turn consuming these goods and services. The more goods and services produced, the more pollution produced, the more natural resources used, etc. Hence by prioritising GDP growth, France’s opportunity cost would be the worsened ecological footprint. 

The budget and national debt

France 2016-2020
Year	Government debt as a % of GDP	Budget surplus (+) or deficit (-) as % of GDP
2016	94.9	-3.60
2017	95.6	-3.00
2018	98.0	-2.30
2019	97.6	-3.10
2020	115.7	-9.20

Figure 3.1 - France's government debt as a % of GDP and budget as % of GDP between 2016 and 2020

https://tradingeconomics.com/france/government-budget 

https://tradingeconomics.com/france/government-debt-to-gdp 

Between 2016 and 2020 France consistently maintained a budget deficit, however, between 2016 and 2019 this value was relatively stable, not fluctuating excessively. In 2020, the coronavirus changed this and France suffered a budget deficit 3x that of the previous year. This was due to France’s response to the global pandemic. In particular 26% of GDP was accumulated to be used for emergencies and recovery measures. (https://www.imf.org/en/News/Articles/2021/01/15/na011921-five-charts-on-frances-policy-priorities-to-navigate-the-covid19-crisis) This is common by many governments, money is borrowed to respond to emergency situations whether that be natural disasters, financial crisis or military related situations. However, this means national debt increase as a result.

Luxembourg Well-being

 OECD Better Life Index Ranking 

Luxembourg performs relatively well compared to other countries in the OECD index, being top in income and wealth, above average in social connections, civic engagement, work-life balance, and other factors, but below average in the education sector. Although money cannot buy happiness, it allows people in Luxembourg to achieve higher living standards. Based on the report, the average household income per capita is USD 39, 264, higher than the OECD average of USD 33,604 a year, with a considerable gap between top 20% richest versus poorest communities. Conclusively, people in Luxembourg have a satisfaction rate of 74% compared to the OECD average of 72%.

Top ranking

Below average

Income and wealth  Higher income allows people to have better access to quality education, health care, and housing. The household net wealth is calculated through the total value of a household’s financial (money, shares, residence, etc)and non-financial value (consumer durables). The average household net wealth in Luxembourg is estimated to be USD 769,053, higher than the OECD average of USD 408,376.  Performance  Luxembourg is doing fairly well in maintaining low income inequality. Although this has increased in the wake of the financial crisis, it still remains below the OECD average while other countries have significant increases since the 1990s. Luxembourg is one of the few countries that still continues to enjoy an above average economic growth, keeping its position with one of the lowest poverty rates. Moreover, the pay gap between men and women is negligible in Luxembourg.  Improvements  While social benefits are generous, the OECD index suggests that it should be better targeted to benefit both growth and equity. The rise in the unemployment rate also points to structural problems in labour markets. The wage indexation system and minimum wage should be thoroughly assessed to prevent competitive risks by removing downward rigidities.

Education and skills Education is crucial in equipping people with the knowledge and skills to become better individuals in society. Good education increases the likelihood to find a stable earning job. However, people in Luxembourg go through 15 years of education, less than the OECD average of 17.2 years.  Statistics 77% of adults aged 25-64 completed upper secondary education, less than the OECD average of 78% Based on the OECD’s Programme for International Student Assessment (PISA), the average student in Luxembourg only scored 483 in reading literacy, maths, and sciences, below the OECD average of 486.  Improvements  Reform of vocational education and training (2008, amended in 2014): better quality of VET provision in secondary schools (e.g. introduction of financial compensation during internships) Reform of fundamental education (2009): includes the introduction of two-year learning cycles, increase in school autonomy, and more parental involvement to prepare an improved school development plan for pre-primary and primary level.  Read the full report: https://www.oecd.org/luxembourg/Education-Policy-Outlook-Country-Profile-Luxembourg.pdf

Happiness Index Ranking 

Based on the 2021 UN World Happiness Report, Luxembourg increased in its rank of 10th place in 2020 to 8th place in 2021, due to the good economic performance of the country amidst the pandemic. 

• No survey in 2020 

The authors of the World Happiness report conducted interviews with residents of different countries to assess their varying levels of happiness. The data collected was then crossed with the national GDP, the international indices of solidarity, freedom, or corruption, which allowed Luxembourg to improve its ranking in 2021. Although Gallup did not conduct a survey in 2020, the average happiness score was build on the figures during the 2018-2019 survey. A key factor in the improved ratings was Luxembourg’s resistance of the economy during a world health crisis. 

John Helliwell, one of the experts who conducted this study also reported that the people perceived the pandemic as a “common and external threat that harms everyone and that resulted in a greater sense of solidarity and empathy”, explaining the noticeable figures in this indicator to evolve positively similar to Luxembourg’s case. 

Happy Planet Index Ranking

Luxembourg ranked 139th out of 140 in the Happy Planet Index, which demonstrates the inefficiency of their economy despite having one of the countries with the highest GDP per capita. For life expectancy and well-being, Luxembourg ranks 16th globally and has low levels of inequality when it comes to these indicators. Although it excels in those social components, its HPI score is heavily affected by its massive Ecological Footprint, with one of the biggest in the world by a significant margin. 

Top ranking  The people of Luxembourg enjoy a high quality of life with a voter turnout of 91% during the recent elections. Since 1986, Luxembourg has offered a minimum wage to those older than 24. The government also conducted a national plan to mitigate discrimination and integrate the migrant population, which makes 43.3% of the national population.

Below Average Luxembourg’s carbon footprint appears to be double the size of the USA’s despite being one of the world’s smallest countries. Not to mention it has the highest car ownership rate and energy consumption per capita in Europe. With low prices of fuel, this also incentivizes fuel-tourism from neighbouring countries. Luxembourg must learn to sustainably adapt and live within environmental limits.

General Trends

Luxembourg GDP/ per capita vs Happiness Index (2009-2019) 

 

Graph Analysis 

Over the years 2009-2019, there has been an evident positive correlation between the income or GDP per capita and the Happiness score of Luxembourg. Although there is a notable relationship, it cannot be deduced that one is the causation for another. Money allows people to achieve higher quality of life, such as purchasing cars, but also can inversely affect their well-being by causing a massive Ecological Footprint. 

Regardless of this, Luxembourg has said to be improving its well-being over time. Angel Gurría, OECD Secretary-General mentioned in his 2019 speech that, “Luxembourg is in an enviable position, with growth that outpaces its neighbours and high levels of well-being for its citizens. However, some of its challenges is “to ensure that Luxembourg remains prosperous and that this prosperity is widely shared, through reforms that enhance economic resilience, inclusiveness, and sustainability.” One of the key focuses on his speech is addressing the housing situation by making construction more expensive to hold unused land. This would be conducted by “introducing land value taxes on land zoned for housing construction, or by imposing sanctions for failing to use building permits.” This is only one of the problems that Luxembourg seeks to address to improve the wellbeing of its citizens. 

Read the full speech: https://www.oecd.org/about/secretary-general/economic-survey-of-luxembourg-july-2019.htm 

Overall, looking across different well-being indexes would be considered more reliable compared to GDP per capita. As aforementioned, having higher income allows citizens to achieve a better quality of life; However, this cannot be mistaken as a causation for a higher happiness index. Therefore, I would advise looking into best measures of performance (OECD, Happiness Index, Happy Planet Index). These measures can provide the government with reliable data to identify problem areas and effectively seek solutions for the betterment of its citizens and Luxembourg’s economy. 

Sources https://www.luxtimes.lu/en/luxembourg/luxembourg-scores-above-average-in-oecd-better-life-index-602d52aade135b923674b7b6

http://www.oecdbetterlifeindex.org/countries/luxembourg/#:~:text=Luxembourg%20performs%20well%20in%20many,in%20the%20Better%20Life%20Index.&text=In%20Luxembourg%2C%20the%20average%20household,USD%2033%20604%20a%20year.

https://paperjam.lu/article/toujours-plus-heureux-au-luxem?utm_medium=email&utm_campaign=23032021%20-%20Matin&utm_content=23032021%20-%20Matin+CID_7674a42e1bd77b1c4a5344c15bf0f18e&utm_source=Newsletter&utm_term=LIRE

http://happyplanetindex.org/countries/luxembourg

https://www.oecd.org/newsroom/luxembourg-has-achieved-high-levels-of-growth-and-well-being-but-must-do-more-to-preserve-and-share-prosperity.htm 

https://www.oecd.org/about/secretary-general/economic-survey-of-luxembourg-july-2019.htm 

https://www.gapminder.org/tools/#$model$markers$line$data$filter$dimensions$country$country$/$in@=lux;;;;;;&encoding$y$data$concept=income_per_person_gdppercapita_ppp_inflation_adjusted&space@=country&=time;;&scale$type:null;;&frame$speed:617&value=2019&scale$domain@=1800&=2019;;;;;;;&chart-type=linechart&url=v1

Luxembourg Economic Growth

Context

Luxembourg is one of the world’s smallest countries located in northwestern Europe. Since the 10th century, it continues to operate as an autonomous, political unit. Well known for its vibrant banking and finance sector, the increasing concentration of migrants has caused the government to locate some industries in rural areas. Three fourths of the country’s workforce is engaged in trade, whereas one fourth is employed in industry or construction. The smallest remainder works in agricultural and other pursuits. 

GDP Analysis

The nominal GDP and real GDP of Luxembourg both increased from years 2010 to 2019. However, nominal GDP, unadjusted for inflation, seemed to have a greater increase compared to real GDP. These relatively high figures result from the biggest sources of primary activity, including banking and financial services, construction, and more. According to the World Factbook, Luxembourg amassed $15.99 billion in exports from machinery and services and $20.66 billion in imports. While real GDP growth increased in smaller increments over time, real GDP per capita had the most significant difference from its value of $85,685.85 in 2010 to $124,569.445 in 2019. This is due to a decrease in the population since GDP per capita is real GDP divided by the population. Assuming a constant population growth, the percentage change in real GDP should be the same as the percentage change in real GDP per capita. Without accurate figures of these values in 2020, it is difficult to discuss the general trend of Luxembourg’s economy before and after the pandemic. 

Table 1.1 Figures for Nominal GDP, Real GDP, Real GDP % Change, and Real GDP per capita 

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Nominal GDP (Billion)	53.212	60.005	56.678	61.739	66.104	57.744	60.691	64.182	70.92	71.105	-
Real GDP (Billion)	45.188	46.336	46.172	47.86	49.916	52.066	54.448	55.428	57.153	58.465	-
Real GDP Growth %	4.865	2.539 %	-0.353 %	3.654 %	4.297 %	4.306 %	4.575 %	1.801 %	3.111 %	2.297 %	-
Real GDP per capita (Thousands)	85,685.785	92,005.017	91,622.177	95,590.539	101,297.576	103,722.991	110,660.867	112,666.769	120,325.921	124,569.445	-

Data Source: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2019&locations=PH&start=2010

Extension Exploration 

GNI Per Capita Analysis 

Figure 1.2 GNI Per Capita of Luxembourg from 2010 to 2019

Figure 1.3 GDP Per Capita of Luxembourg from 2010 to 2019

Data Source: https://www.macrotrends.net/countries/LUX/luxembourg/gdp-per-capita 

Table 1.2 GNI and GDP per capita of Luxembourg from 2016 to 2019 

	2016	2017	2018	2019
GNI per capita	$68,670	$66,430	$70,910	$73,910
GDP per capita	$104,278	$107,627	$116,654	$114,705

GNI per capita, gross national income per capita, is converted to U.S. dollars using the World Bank Atlas method (for comparison across different economies) and divided by the midyear population. It is the sum of value added by all resident producers, including product taxes and net receipts of primary income from abroad. 

GNI per capita is usually about 36.5% lower than GDP per capita. This is because Luxembourg is known for being a business-friendly country; Its low corporate tax rate, stable workforce, and government incentives, along with its small population, resulting in a high GDP per capita. Low GNI per capita values are usual for countries wherein many foreign businesses are operating. This is because the profits for these businesses are repatriated to the country of origin against the country’s GNI but not the GDP. 

In 2020, the GDP per capita of Luxembourg was $116,921, which was $1,082 less than in 2019, when it was $115,839 (countryeconomy.com). Although I could not find any GNI per capita values in 2020, I figured it would be much smaller than the fall in GDP per capita. 

Figure 1.2 GNI per capita growth (annual %) 

Data Source: https://www.gapminder.org/tools/#$chart-type=linechart

Using the Gapminder tool, I analysed the values of Luxembourg's annual GNI per capita growth from the years 2010 to 2020. However, in Figure 1.2 above, the results for 2020 are not yet visible. Throughout the years 1980 to 1985, there had been a massive increase in the GDP values of around 32%. This is the second-highest recorded growth apart from the financial crisis recovery in 2009 to 2010 of about 40%. From 1985 onwards, there were primarily minor fluctuations in the GNI per capita values, until massively decreasing in 2009 of more than 50%. This was mainly due to the ongoing financial crisis and the first global recession in 60 years that heavily affected Luxembourg’s small open economy. Its financial sector, mostly composed of 152 foreign-owned subsidiary banks (Europe’s largest investment fund industry and second-largest money market industry) had been fully exposed to the economic turmoil. Apart from the financial service exports, the economy’s traditional export sectors also affected this contraction in European demand. 

From 2010 to 2011, Luxembourg had a relatively quick recovery and financial recovery. This is mainly credited to the authorities’ rescue of Fortis and Dexia bank and the intervention of three other insolvent banks. With Luxembourg being recognized as Europe’s advanced financial centre, it was imperative that after economic turmoil like these, for authorities to develop effective multilateral aid agencies. 

Although there are no available GNI per capita values for 2020, I hypothesize that there would only be a slight decline in the values compared to 2019. According to macrotrends.net, “As of December 1, 2020, 330 deaths had been attributed to the pandemic in Luxembourg, and the economy was forecast to contract by 5.8% for the year.” Compared to the Philippines, Luxembourg’s estimated unemployment rate was 5.4%. I imagine this is mostly accredited to other economic sectors (e.g. agriculture and other pursuits). I presuppose that Luxembourg will discover a way to recover after a slight decline before the pandemic ends. This is mainly due to three-fourths of its economy being involved in trading. In this scenario, I imagine it would not be overly challenging to continue working at home and engaging in online trade instead. The real question is whether other economic sectors can adapt during this pandemic and its possible consequences in becoming a long-term problem. 

Sources: 

https://www.macrotrends.net/countries/LUX/luxembourg/gni-per-capita 

https://www.imf.org/en/News/Articles/2015/09/28/04/52/mcs033009

https://www.imf.org/external/pubs/ft/scr/2009/cr09178.pdf

https://www.cofacecentraleurope.com/Economic-analysis/Luxembourg

https://www.cia.gov/the-world-factbook/countries/luxembourg/