With reference to Figure 1, Extract A and your own economic knowledge, discuss the limitations of using Gross National Income (GNI) per capita data to compare living standards between the UK and emerging market economies.
Figure 1: Annual percentage change in Real Gross National Income (GNI) per capita, 2018-2021
| 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|
| United Kingdom | 1.2% | 1.4% | -10.4% | 7.5% |
| Emerging market economies (average) | 3.8% | 3.3% | -2.1% | 5.9% |
The post-pandemic economic recovery in the UK has been highly unbalanced across different regions and sectors. Some economists argue that focusing solely on growth in national output fails to capture the day-to-day realities of households, especially as real household disposable incomes have been squeezed by rising costs. There is a growing consensus that we must measure the quality, and not just the quantity, of economic growth.
National income metrics like GNI per capita fail to fully account for disparities in income distribution, nor do they record the value of unpriced domestic work and voluntary services. Furthermore, economic growth figures often hide differences that are not captured in official accounts. Statistics indicate that the relative size of the informal (or shadow) economy in emerging market economies is estimated to be around 35% of total official GDP, compared to approximately 10% in the UK. Additionally, the rapid industrial growth in emerging markets has generated significant negative externalities, such as air pollution and environmental degradation, which directly undermine public health and well-being.
