Eurostat, the statistical database of the European Union, publishes detailed economic data each year to compare living standards in each EU region, with the latest figures showing the 2019 situation. According to the analysis of Növekedés.hu, Budapest is ahead of several important Western European cities, such as Berlin and Vienna. However, there are several questions that arise regarding representation as well as methodology, that can shed a new light on living standards in Hungary.
In order to come to a conclusion regarding living standards in the regions and cities of the European Union in 2019, data shows the value of goods and services produced and consumed divided by population, in other words: GDP per capita. Eurostat then converts GDP data into a fictitious currency, the PPS (Purchasing Power Standard), due to large price differences between countries. The reason for this is simple. When someone wants to move abroad – for instance to London – it often arises that it is useless to earn much more, when rents and other prices are high as well. Hence, the different price levels are completely deducted by PPS and shows what the actual standard of living is.
In terms of PPS living standards, Budapest is 150 percent above the EU average, whereas for Vienna and Berlin, just to mention a few, it is 149 percent and 123 percent above average, respectively. What this suggests is that according to the statistics there are better living conditions in Budapest than in notable Western European cities.
Not only Budapest performed well on Eurostat’s statistics. It is also interesting to see that on the list, Budapest is behind the Romanian capital, Bucharest, just as the Hungarian capital was preceded by Warsaw, Bratislava, and Prague. Thus, the big cities of Central and Eastern European countries all performed well. So much so, that Prague ranks second after Luxembourg, with a living standard, 205 percent above the EU average. This is primarily due to the fact that economies in the Central European region are typically capital-centric. The countryside is usually torn down. In contrast, in Germany for example, people live above the EU average in almost all regions. In addition, Berlin is not even in the first place in terms of living standards. The Bavarian region is more developed in this regard.
So what happens when we compare living standards in Budapest with the Hungarian countryside?
Briefly, we can see that high GDP per capita is not at all representative to the whole country in terms of how Hungary suffers from serious regional inequalities. Central Hungary is the only region that exceeds the EU average, after that, Western Transdanubia is the best with 71 percent of the EU average. The Northern Great Plain and Northern Hungary are two of the poorest regions in the country. In addition, data that sheds light on a new picture is that Hungary as a whole is 27 percent below EU average.
In terms of all countries in the EU, the negative list is mainly dominated by Bulgarian regions, however, a French overseas territory has also been included- on the island of Mayotte in the Indian Ocean, where the living standards of about a quarter of a million people are only 32 percent of the EU average.
What are the flaws of measuring the standard of living in GDP per capita?
Indeed there is much criticism related to the methodology of measuring the standard of living predominantly by GDP per capita, as it may not indicate the truth of living conditions in some countries. It is worth emphasizing that standard of living only measures the wealth of material things its citizens have, not quality of life.
First, GDP per capita does not effectively measure pollution, safety, and health, which are all crucial determinants of high living standards. For example, the government may encourage the development of an industry that spews chemicals as part of its manufacturing process. Elected officials only see the jobs created and the standard of living measurement only counts the value of the goods produced. The costs of polluted air and water may not be recognizable until decades later.
And most importantly, the GDP per capita measurement assumes that production and its rewards are divided equally among everyone. This is due to the fact that it is an average and ignores income inequality. It can report a high standard of living for a country or city where only a few people at the top are wealthy.
Featured photo illustration by Zsolt Szigetváry/MTI