Roughly half the world’s population still lives on the equivalent of about US$ 2 a day with global unemployment rates of 5.7% and having a job does not guarantee the ability to escape from poverty in many places. This is why promoting sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all is an important goal that can also help achieve other SDGs.
This slow and uneven progress requires us to rethink and retool our economic and social policies aimed at eradicating poverty. A continued lack of decent work opportunities, insufficient investments and under-consumption lead to an erosion of the basic social contract underlying democratic societies: that all must share in progress.
Even though the average annual growth rate of real gross domestic product (GDP) per capita worldwide is increasing year on year, there are still many countries in the developing world that are decelerating in their growth rates and moving farther from the 7% growth rate target set for 2030. As labor productivity decreases and unemployment rates rise, standards of living begin to decline due to lower wages.
Sustainable economic growth will require societies to create conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working-age population.
Economic growth, especially among the least developed and other developing countries, is a way of reducing the wage gap relative to developed countries, thereby diminishing glaring inequalities between the rich and poor. And this growth will need to be accompanied by financial services and infrastructures that bring stability to the process.
GDP growth in the least developed countries
In the period 2010-2014, the global average annual growth rate of real GDP per capita was 1.6%, slightly below the rate achieved over the period of 2000−2004.
The growth rate of countries in developing regions was more than triple that of developed regions (4.1% versus 1.3%, respectively), yet the rates for both regions were below their historical averages. This suggests that much work remains to achieve the goal of sustained and inclusive economic growth.
The challenge is particularly steep for the least developed countries, whose per capita growth accelerated for a time, but has since slowed to only 2.6% on average during 2010-2014, less than half the target rate of at least 7% a year.
Labour productivity (measured by GDP per worker) spurs economic growth. Growth in labour productivity in developing regions far outpaced that of developed regions, especially in Asia. Between 2010 and 2015, labour productivity grew by 0.9% per year, on average, in developed regions, while rising by 6.7% per year, on average, in Eastern Asia, the region with the fastest growth.
Despite rapid growth in some developing regions, the productivity of workers in the poorest regions is still only a small fraction of that of workers in the developed world.
Workers in Southern Asia and Sub-Saharan Africa, for example, are only about 5% as productive as those in developed regions, when measured as a percentage of GDP. Even the developing region with the highest labour productivity, Western Asia, has only about 40% of the labour productivity of developed regions, and this rate has declined slightly since 2000.
What does this mean and what does this look like?
According to the European Union, “economic growth contributes to society’s well-being by enabling people to make a decent living and to enjoy high living standards. While it is an important driver of prosperity, economic growth can also harm the environment that it depends on.”
Europe also considers it crucial for future wellbeing to pursue sustainable economic growth that tries to satisfy the needs of the present generation in a manner that sustains natural resources and the environment for future generations, according to the main premise underlying Sustainable Development.
One of the indicators to measure good living standards is the growth in GDP, as we have seen above. This number is commonly used as an important standard for measuring a country’s socio-economic development. It gives an indication of an economy’s potential to satisfy people’s needs, its capacity to create jobs and can be used to monitor economic development. But, there is an expanding awareness that focusing on GDP alone is not enough to achieve better lives for all.
The Organisation for Economic Co-operation and Development (OECD) established its own indicator, the OECD Better Life Index, which shows a positive correlation between GDP per capita and wellbeing. However this relationship becomes weaker as a country’s income grows, suggesting that once income reaches a certain level, increased income is less likely to generate well-being.
The chart also indicates a higher performance by some countries when being evaluated by the Better Life Index than only on the basis of economic production per capita. This is the case for all the Nordic European countries but also for New Zealand. On the other hand, there are countries that do better in GDP per capita than on average well-being, for instance, the United States and Switzerland.
Denmark performs very well in many measures of well-being relative to most other countries in the Better Life Index. Denmark ranks above the average in many dimensions: housing, work-life balance, social connections, environmental quality, civic engagement, education and skills, jobs and earnings, work-life balance, health status, subjective well-being and personal security, but it ranks below average in income and wealth.
Looking at numbers for another SDG, SDG11, we find a reason to believe that life in Denmark is perfect, since the proportion of the urban population living in slums was 0.0 % in 2016. But, at the same time, the average mean concentration of fine suspended particles of less than 2.5 microns in diameter (PM2.5) was about 10.12 micrograms per cubic metre. This is above the maximum level for safety set by World Health Organisation of 10 micrograms per cubic metre which indicates us the special attention we have to pay to the environment in these cases since it can affect our wellbeing, in this case, our health.
Hygge and the secret to Danish happiness