Social inequality more impactful on well-being than income inequality

19 July 2019 Consulting.us

Boston Consulting Group’s Sustainable Economic Development Assessment (SEDA) suggests that the correlation between well-being and social equality is stronger than that between income equality and well-being. Likewise, those individuals in countries with high levels of social equality tend to be happier than those without.

SEDA makes an objective measurement of well-being by examining and analyzing 10 dimensions in three categories. The “economics” category includes income, economic stability, and employment. “Investments” includes health, education, and infrastructure. “Sustainability,” meanwhile, comprises social aspects such as income equality, civil society, governance, and environment. The final measurement is subjective, looking at how countries perform “relative to the rest of the world or to individual peers or groups of countries,” according to the report.

SEDA Assesses Relative Well-Being Across Ten Dimensions

This is valuable for countries which aim to govern based on factors beyond GDP – a decision that is becoming increasingly popular. BCG proposes that countries create a three-pronged dashboard on which per-capita GDP growth, and both objective and subjective well-being.

“Governments today face massive challenges, including the disruption created by rapid technological advances,” Joao Hrotko, a partner at BCG and coauthor of the “Measure Well-Being to Improve It: The 2019 Sustainable Economic Development Assessment” report, said. “Those factors will change what it takes for both public- and private-sector players to succeed in the next decade. Governments in particular must gain deep insight into the experiences of their citizens in order to address potentially overlooked problems, including social inequality.”

Countries with Higher SEDA Scores tend to Have Higher Social Equality

Citizen experience is a tricky matter. Wealth, for example, while not as highly correlative as social equality, is still an important factor to overall well-being. But it doesn’t always translate into happiness. This is where the three-pronged dashboard becomes useful – when placed next to each other, it is much easier to see how wealth and happiness diverge.

“Governments that focus on a single metric such as GDP will miss important signals related to problems in their nation,” Enrique Rueda-Sabater, a BCG senior advisor and coauthor of the report, said. “The three-pronged approach we envision will create a clear picture of where they need to take action.”


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