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Problems related to measuring and interpreting indicators of the standard of living

The paper deals with different approaches to measuring living standards. Attention is drawn to income and expenditures recorded in selected countries of the European Union (the United Kingdom, Sweden, Germany, Spain and the Czech Republic). The basic model of linear regression analysis is used to present the curve of the income and expense situation of households. In order to reveal more specific details, analyses based on income quintiles are carried out. The European methodologies EU SILC and COICOP have been chosen as the main source of data. The period of interest was set for years 2005-2013. The article draws attention to ambiguity of commonly used objective indicators of the standard of living while measuring it.


Introduction
Economically advanced countries, including those of the EU, the issues of income inequality and poverty have been becoming more important. Even though income inequality may have both positive and negative relations to the prosperity of people, a large number of economists believe that the increasing differences in income may have rather damaging effects on the whole of society. Big differences in income are ineffective, as they evoke dissatisfaction and instill anger in people, which results in a populist policy eliminating growth. According to the IMF, the income inequality slows down the economic growth, causes financial crises, and weakens the demand [1]. The relation between economic performance and social development of the society, which has been becoming more problematic, led renowned economists and sociologists led by Joseph Stiglitz, Nobel Prize winner, to identify and formulate an unambiguous opinion concerning this issue. These economists claim that the gross domestic product per capita (GDP) is an indicator unsuitable for finding out environmental, economic, and social impacts, as it says nothing about the quality of life. According to the committee, the quality of life, affluence, and related standard of living depend not only on economic resources, but also on services provided by the public sector, i.e. medical, social, and educational services, feeling of security in public space, affordability of housing, and rate of employment. The quality of life, standard of living, and affluence are very similar terms that often overlap. The way they are presented shows how different they are, though. The standard of living is presented by real income, and it's supposed to present material and economic conditions of people. The quality of life refers to the overall wealth of people within a society and their chance to use opportunities in order to fulfill their aims, i.e. it doesn't contain only economic variables but also other variables based on subjective feelings. The affluence is considered mainly a subjective feeling, which is thus very hard to [2].
An inability to satisfy one's needs, insufficient access to education, bad health, and unsatisfactory healthcare, care for the old and the weak, tendencies to violence and crime, lack of political freedom, and an opportunity to assert oneself in the society -all these are phenomena of poverty [3]. The primal impulse in the chain of poverty indicators is often a lack of finances, which is why in economically advanced countries where the topic of interest is a relative poverty (income of a single individual is lower than standard) the poverty is presented in form of an indicator of income poverty. It's far more difficult to present the relative poverty, as first it's necessary to determine (select) the break-even point to define the poverty line. This break-even point has to respect the conditions of the majority, i.e. it differs in individual regions or countries. For the purposes of comparing living conditions in individual its countries the EU defined this break-even point within a unified methodology as a certain percentage of the average income. Some sociologists claim, however, that the term poverty in advanced EU countries is rather about some people feeling they don't have what the others do, feeling that they're unable to handle everyday financial worries, and that they cannot keep pace with the majority in the society [4]. In order to resolve economic and social problems of the society it is necessary not only to have unambiguous definitions and indicators derived from them, but also an ability to find out and measure values for individual subjects. The ability to correctly interpret the obtained results is similarly important. The aim of this paper is to draw attention to the differences in approaches to measuring the standard of living and to interpretation of the results of the indicators related to measuring the standard of living of the EU inhabitants.
The paper is organized as follows: section 2 describes the methodology and introduces the dataset. Estimations results are presented in section 3 and finally, section 4 concludes.

Methodology
In order to present the level of economy and its progress in individual EU countries and the EU as a whole, an indicator of changes of the GDP curve and of the overall people's consumption was used. To illustrate the economic and material situation of people we used the data on income and expenses of households.
We used deciles in the income and expense analyses. From the created distribution function (ECDF) borders of deciles were found out.
The subject countries are EU countries selected based on their relation to various zones of cultural affinity [5]. Their representatives are UK, Sweden, Germany, Spain, and the Czech Republic. The period monitored is 2005-2013 due to the availability of the data for all the countries, as in 2005 the EU SILC examination was performed for the first time after joining the EU.
Poverty in the EU countries was demonstrated using an aspect of income poverty specified as 60% of the equalized income median, material deprivation, and unavailability of jobs.
In order to present the curve of income and expense situation of households in the relevant years, we used the basic model of linear regression analysis, in which the medium value of Y dependent variable is bound with one T independent variable in a relation where b is a direction of a straight line and ε t stands for a residual item: We also employed regression models to present income and expense situations of households in general in the selected quantile. T-statistics is provided to determine suitability of parameters of the regression function.
The main source of secondary data is an EUROSTAT database provided by the statistical office of the European Commission.
The source for information used in the evaluation of the standard of living is statistics obtained from the European Union -Statistics on Income and Living Conditions (EU SILC) project, which deals with income and living conditions in the EU.
The data on expenses of households in individual member countries of the EU are determined by the expenses on individual items according to the COICOP (Classification Of Individual Consumption by Purpose) methodology.

Results
This paper evaluates the standard of living of people in selected EU countries and focuses on the problem we come across when measuring and interpreting selected indicators and achieved results. Yet, it's impossible to omit monitoring of the curve of the GDP indicator, as the level of economy, or the achieved progress of the GDP, determines various economic and social decisions made by the government. Till 2007 the GDP in the EU countries had been permanently growing; then, during the world economic crisis, there was a drop in the GDP, while the biggest drop of 4.6% was monitored in 2009 for the whole of the EU. The crisis hit all the economies of the EU, and its impacts started to show in 2008. Even though most countries adopted extensive anti-crisis measures, basically no country managed to avoid a drop in its demand and a drop in the growth of the GDP [6]. The impacts of the crisis and economic development of individual countries both in and outside of the EU was very heterogeneous [7]. The differences between the member countries of the EU remain also very distinctive both in terms of the pace of the growth of the GDP (reflecting the differing levels of economies of the EU members) and the GDP per capita [8]. From the currently-available data for 2013, we used the GDP indicator per capita, as calculated based on the purchasing power parity (figure), with the EU average marked as 100%, to show the levels of economy of individual countries.
The GDP indicator can be determined in several ways. There is a positive relation between the GDP curve and total expenses of households on consumption. The consumption of households reaches 56% of the average of the GDP in EU-27 in the given period. Based on these facts we can say that the total consumption of households is affected by the GDP curve and the conditions of the given economy.
The   From the examination, it follows that around people in the EU are endangered by poverty exclusion. Based on the frequency of these say that around 9% of people are endangered to one aspect of poverty, 2% of people are poverty due to two possible aspects, and almost are endangered by all these three aspects group of households fulfills the conditions by all the negative social consequences, requires the biggest financial support with More detailed studies will help reveal countries with the biggest concentration of these people. problem of poverty has to start with a group first affected only by one aspect of poverty.
Classifying someone as endangered is usually income situation of households. This is why the most intensive interest and more detailed paper, the more detailed analyses and their carried out for selected EU countries based cultural affinity that show the biggest similarity behavior [10]. From the classification of individual quantiles ( the 1 st quantile in figure their income, we can derive that even monitored countries have higher income necessary to cover their needs in the monitored not like that at all in case of the households individual income quantiles. : Problems Related to Measuring and Interpreting Indicators of the Standard of Living around 12% of the poverty or social these aspects we may endangered by poverty due are endangered by almost 1% of people aspects of poverty. This for being affected consequences, and rectification with an unclear result. countries (regions) people. Resolving the group of households poverty.
usually based on the why it's a subject of detailed analyses. In this their findings will be based on zones of similarity of consumer of households into figure 4) based on even though all the income than expenses monitored period, it is households classified into In the first quantile in all the bigger expenses of households smallest differences between monitored in Sweden while these rising for Germany and the Czech differences are in the UK and Spain. households with the lowest income countries should be monitored necessary to find out about causes what types of households they activities, education, and number household, how big their impact household, how big the impact household, how long have they -mainly -whether they want to of finances. The differences in income situation were monitored classified in the second income Sweden, these households receive need of expenses, in Germany approximately the same, in the income is slightly lower than : Problems Related to Measuring and Interpreting Indicators of the Standard of Living quantiles in individual countries the monitored countries there are households than their income. The income and expenses were these differences are gradually Czech Republic, and the biggest Spain. This means that 20% of income in all the monitored monitored more intensively. It's causes of their income situation, they are in terms of economic number of members of the impact is on the situation of their impact of social policy is on their they been in such conditions, and to or already deal with the lack in the results of analyses of the monitored for the households income quantile (figure 5). In receive income bigger than their Germany income and expenses are the UK and Czech Republic than expenses. In the Czech Journal of World Economic Research 2014; Republic the amount of income gradually required need of expenses. The situation negative, as the differences between income very big. In the third quantiles, except countries record income bigger than the required expenses. This shows that in Spain live close to the poverty line and social exclusion, signal of potential social unrests in the whole Journal of World Economic Research 2014; 3(6-1): 9-14 gradually got closer to the situation in Spain is very income and expenses are for Spain, all the the amount of their Spain 60% of people exclusion, which is a whole country. Results of the analyses of the living standards imply that the influence of the economic crisis proved itself widely divergent not only among the states, but even in the change of GDP per capita. Such a statement applies to expressing the living standards mainly via GDP. While expressing the living standards by average household income, it proves itself divergent but with a certain time shift. The crisis effects are more evident by the 1st quintiles. Influence of the world economic crisis is followed then by changes of poverty rate and material deprivation.

Conclusion
Based on the analyses of secondary year by Eurostat that concern income and expense situations of households, we believe that it's necessary to deal with these issues in more detail. Income a analyzed always in mutual interactions, not separately between individual countries. The relation between these values is essential, as it provides a strong basis for evaluating the standard of living of people. The commonly availabl results are obtained by processing the data obtained from examinations carried out by EU SILC and CIOCOP according to a unified methodology binding for all the EU countries. These data are used for a partial evaluation of the standard of living. It's "partial" because the standard of living is influenced by numerous factors, which is why impossible to present it only within a single numerical value. Despite its limitations this evaluation is still of crucial importance, which is why a numbe deal with it. Unfortunately, the results concerning the income and expense analysis are very generalizing, as they work with average values for the whole results it was possible to erroneously 10 years in the whole of EU, and was a positive development of the difference between the income satisfy the needs was getting differs so much that it's necessary income values in the set and, mainly, big number of low-income households. authors of this paper dealt with and expense situation in partial classified into individual quantiles.

quantiles in individual countries
Results of the analyses of the living standards indicators imply that the influence of the economic crisis proved itself widely divergent not only among the states, but even in the change of GDP per capita. Such a statement applies to expressing the living standards mainly via GDP. While living standards by average household income, it proves itself divergent but with a certain time shift. The crisis effects are more evident by the 1st and 2nd income quintiles. Influence of the world economic crisis is followed ate and material deprivation.
secondary data published every Eurostat that concern income and expense situations of households, we believe that it's necessary to deal with these issues in more detail. Income and expenses have to be analyzed always in mutual interactions, not separately between individual countries. The relation between these values is essential, as it provides a strong basis for evaluating the standard of living of people. The commonly available results are obtained by processing the data obtained from examinations carried out by EU SILC and CIOCOP according to a unified methodology binding for all the EU countries. These data are used for a partial evaluation of the rtial" because the standard of living factors, which is why it is close to impossible to present it only within a single numerical value.
its limitations this evaluation is still of crucial , which is why a number of world-class experts deal with it. Unfortunately, the results concerning the income and expense analysis are very generalizing, as they work with average values for the whole set. Therefore, from these erroneously derive that during last and also in most countries, there of the income situation and that income and expenses necessary to getting bigger. Income variability necessary to deal with arranging mainly, with the situation in a households. This is why the with an evaluation of the income partial sets created from the values quantiles. From these analyses major differences between the countries monitored followed. In the EU, there are countries that -despite the achieved high, absolute value of income -show a positive trend of development during the whole monitored period and a relatively big unit change. Such an example is Sweden followed by Germany. The big absolute level of income is recorded also in the UK, only this value didn't almost change during the 10 monitored years, and there's a slightly negative direction of the curve, which is -among other thingsaffected by the relation of different currencies of British pound and euro. In the Czech Republic, there was the fastest pace of growth of income; however, the starting absolute value was very low. Spain is quite the opposite, i.e. a relatively big absolute value of achieved income grew only slowly. From the analysis of income situation in individual income quantiles we can derive different opinions about the living conditions of the households, in terms of the positive trend in the growing difference between income and expenses. This is not fulfilled in any of the countries monitored in the 1st quantile. It was fulfilled in the second income quantile in Sweden and Germany where the income gets closer to the expenses in the UK and Czech Republic (mainly in last monitored years), and in Spain in the second quantile the income doesn't cover the required expenses, and the households in the third quantile are able to cover them either. It's been confirmed, then, that among other things this fact makes us think that it's not suitable to analyze the relation between income and expenses from the average values of the society, but it's necessary to analyze also the differences between different groups of people that may be very distinctive in some cases. These analyses determine the countries where maximum of 20% of people are in danger of poverty, countries with more than one third of people in danger of poverty, and countries like Spain where over one half of people are in danger of poverty and social exclusion. These numbers of people in danger of poverty, when considered either from the perspective of one or several aspects of poverty monitoring, create a serious social and political problem that the analyses have to address, and it's thus impossible to hide any facts.