Measuring and managing multidimensionality: insights from How’s Life? and other OECD projects

1. Measuring and managing multidimensionality: insights from How’s Life? and other OECD projects Paul Schreyer, Deputy Director of the Statistics Directorate E-Frame Final Conference “GDP and Beyond: Measurement, Policy Use and Moving Forward” 10-11 February 2014, Amsterdam

2. Background (1) • OECD work on well-beingstarted over 10 yearsago • OECD’s measurement of well-being: • Multi-dimensional • Focus on people and households • Focus on outcomes • Objective and subjective aspects • Bothaverages and inequalities

3. Background (2) the OECD well-being framework

4. Background (3) OECD work on well-being: main products How’s Life? Measuring well-being A biannual report providing evidence on well-being (cross-country, over time) The Better Life Index An interactive web application to disseminate and engage with people on what matters most in life

5. What have welearnedfromthisprocess? • And how canwemake the link to policy?

6. Policy use of multi-dimensionalframeworks and -measures • Tool to informpolicydebate(How’s Life?, Better Life Index) • Framework for policy design (National approaches) • Quantitative tool for policyanalysis(Inclusive Growth)

7. A tool to informpolicydebate (ex 1): understandingstrengths and weaknesses Canada Netherlands Greece

8. Toolto informpolicydebate (ex 2): assess the full consequence of the Great Recession GDP does not tell the whole story Source: OECD National Accounts Database

9. Tool to informpolicydebate (ex 3): crisis and subjective well-being Life satisfaction dropped as unemployment increased Source: How’s Life? 2013 X-axis: Life Satisfaction =average score on a 0-10 scale ; source: OECD calculations on the World Gallup Poll Y-axis: Long term unemployment rate= % of the labour force unemployed for one year or more; source: OECD Labour Force Statistics

10. Tool to informpolicydebate (ex 4): The crisis also affected other aspects of life Trust in governments declined But new forms of solidarity emerged Percentage of people reporting to trust national government Percentage of people reporting having helped someone, 2007=100 Source: OECD calculations on Gallup World Poll

11. Lessons (1) Dashboard vs.composite index • Much debate about pros and cons • Ease of communication • Weights, interpretation of composite • Wemayneedboth • For different audiences • For differentpurposes: • How do drivers of WB evolve? Dashboard • How is WB jointlydetermined by drivers? Composite • OECD: • No weights (HiL) • Self-selectedweights (BLI) • Estimatedweights in Inclusive Growth (new)

12. Lessons (2) The ‘correlation’ argument ‘WB measures show enoughcorrelationwith GDP per capita to simplyconcentrate on the latter’ • Onlyapproximatelytrue: muchunexplained variance • Incorrect for particular dimensions (GDP and obesity) • Correlationsaysnothing about relationship GDP – WB: e.g., couldhigherlevels of WB beachievedwithdifferent GDP? • Loses a key policy message: WB should not be a ‘spin-off’ or collateral of growth but the primarypolicytarget

13. Lessons (3) The ‘happiness confusion’ ‘OECD shows thathappiest people are in country X’ • distinction betweenmeasures of subjective and objective WBgetslost – its all about ‘happiness’ • Relegation to ‘qualityproblem’: the ‘real issues’ are elsewhere • Even harder: gettingacrossdistinction betweendifferent subjective measuresof life evaluation (egcantrilscale) and subjective experiencemeasures (affect)

14. Well-being as a framework for policy design (Ex 1): The New Zealand Treasury Framework • Policy tool developed for front-line policy analysts • A “manageable list of the key issues that make the most difference” • Embed the concept of living standards more systematically and more visibly in policy advice to Ministers

15. Well-being as a framework for policy design (Ex. 2): informing the budgetaryprocess in Israel Measurement and evaluation Wellbeing indicators as analysis and measurement tool Wellbeing indicators as part of the strategy process Emphasis and focus for the term of office Detailed planning and allocation of funds Options Vision and overarching goals Implementation Analysis

16. Well-being as a framework for policy design (Ex 3): New UK vision

17. Lessons (4) Needed: a policy-integrated framework for well-being • From ‘accidental’ to systematic checking of consequences of policies on multiple dimensions of well-being • OECD proposes (E-Frame Handbook) a policy-integrated framework that drives: • Alignment of outcomes across government agencies and processes • Analysis of policy options and consequences • Accountability of results (next slide)

18. Joining-up policy at all stages

19. Lessons (5) • Whole of government approach for credibility and to go beyond institutional silos • A common set of criteria for setting priorities • Systematic evaluation but also ‘stories’ needed how WB Framework has affectedpolicy design

20. Sendstepsquestion here (”What do we need to do to make multi-dimensional measures to become a true reference for policy makers?”)

21. Finally: WB as quantitative tool for policy appraisal • Example: OECD work on Inclusive Growth • Experimentalcomposite measureof Living Standards • Sub-set of WB dimensions: Income Jobs Health • Adjusted for inequality • Model to link living standards to policies

22. Overallmeasure: Living standards

23. De-composition of living standards of medianhouseholds 1995-2007

24. Identifyingdeterminants of components of living standards (e.g. health)

25. Lessons(6) Quantitative policyappraisal • Needto build up empiricalevidence on interaction betweendimensions • Tricky but crucial: estimatingdeterminantsof health, jobs, HH income and their distribution • Trade-offbetweencapturingcomplexity and quantification • But much of the success of WB measureswill lie in ourcapacity to link to policies

26. THANK YOU! www.oecd.org/howslife www.oecd.org/measuringprogress www.oecdbetterlifeindex.org