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