Published by Patrick Mutisya · 8 days ago
Living standards measure how well people in a country or region are able to meet their basic needs and enjoy a decent quality of life. The most widely used composite indicator at the IGCSE level is the Human Development Index (HDI), which combines three key dimensions of human development:
The HDI is a dimensionless index that ranges from 0 (lowest human development) to 1 (highest human development). It is calculated as the geometric mean of three normalized sub‑indices:
\$\text{HDI}= \left(I{\text{health}} \times I{\text{education}} \times I_{\text{income}}\right)^{\frac{1}{3}}\$
The health dimension is measured by life expectancy at birth. The sub‑index is normalised using the following formula:
\$I_{\text{health}} = \frac{\text{LE} - 20}{85 - 20}\$
where LE = life expectancy at birth (years). The minimum value (20 years) and maximum value (85 years) are set by the UNDP.
The education dimension combines two indicators:
The education index is the arithmetic mean of the two normalised indicators:
\$I_{\text{education}} = \frac{1}{2}\left(\frac{\text{MYS}}{15} + \frac{\text{EYS}}{18}\right)\$
Maximum values are 15 years for MYS and 18 years for EYS.
The income dimension uses Gross National Income (GNI) per capita (in PPP US$). Because income has diminishing returns to human development, the natural logarithm is applied before normalisation:
\$I_{\text{income}} = \frac{\ln(\text{GNIpc}) - \ln(100)}{\ln(75\,000) - \ln(100)}\$
where GNIpc = GNI per capita (PPP US\$). The minimum and maximum reference values are \$100 and $75,000 respectively.
| Dimension | Indicator | Formula for Sub‑index | Reference Minimum | Reference Maximum |
|---|---|---|---|---|
| Health | Life expectancy at birth (years) | \$\displaystyle I_{\text{health}} = \frac{\text{LE} - 20}{85 - 20}\$ | 20 years | 85 years |
| Education | Mean years of schooling (MYS) | \$\displaystyle \frac{\text{MYS}}{15}\$ | 0 years | 15 years |
| Education | Expected years of schooling (EYS) | \$\displaystyle \frac{\text{EYS}}{18}\$ | 0 years | 18 years |
| Education (combined) | Average of MYS and EYS | \$\displaystyle I_{\text{education}} = \frac{1}{2}\left(\frac{\text{MYS}}{15} + \frac{\text{EYS}}{18}\right)\$ | — | — |
| Standard of living | GNI per capita (PPP US$) | \$\displaystyle I_{\text{income}} = \frac{\ln(\text{GNIpc}) - \ln(100)}{\ln(75\,000) - \ln(100)}\$ | $100 | $75,000 |
These thresholds help compare the overall well‑being of countries and track progress over time.