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Well-Being Index

The purposes of the WBI are to regularly provide results to monitor the evolution of well-being and social progress in two instrumental aspects – material living conditions of households and quality of life.
This index provides breakdowns into ten domains: economic well-being; economic vulnerability; labour and earnings; health; work-life balance; education; knowledge and skills; social interactions and subjective well-being; civic participation and governance; personal security; environment.
Well-being Index - What is?

1. What is the meaning of well-being in the context of this index?

Well-being is defined as the best standards of quality of life at large. The concept of well-being covers not only material living conditions, but also other factors which contribute to quality of life, namely those related to the environment, good health, proper educational attainment, use of time, in particular work-life balance, the value of living in a society, a good level of democratic participation as well as access to and involvement in cultural and leisure activities. In the definition of the concept here adopted, well-being is not equivalent to subjective well-being, although the latter influences the former.

2. Is the WBI a happiness index?

Not at all. Happiness is by definition a subjective and transient state – that which can boost happiness in one person at a time may generate precisely the opposite effect at another. Therefore, the WBI does not intend to assess a person’s happiness. The happiness indicator in WBI is just a component to assess the evolution of individual subjective well-being, within the scope of the social interactions and subjective well-being domain. The WBI seeks to portray developments in the standard of quality of life in its broader sense. For that, it considers the analysis of changes in material living conditions (in terms of economic well-being, economic vulnerability, labour and earnings) and in a stricter sense, factors related to quality of life and inter-related: health; work-life balance; education, knowledge and skills; social interactions and subjective well-being; civic participation and governance; personal security; environment.

3. To whom is the WBI addressed?

One of the main purposes of the WBI is to foster dialogue among the different actors promoting economic and social progress, and among citizens in general. The WBI can be a useful instrument for a wide group of opinion-makers, public and private decision-makers, including all levels of governance, non-governmental organisations, researchers, the media and the public.

4. What are the limits underlying the construction and use of the WBI?

The WBI provides information on the evolution of well-being only at national scale. This means that a geographical breakdown is not possible because a substantial part of the list of indicators used to construct the WBI does not provide statistics at a finer geographical level. The current WBI release stage does not yet include analysis based on specific populations, largely depending on crossed microdata, a process still under development at EU27 country level, considering the concerns about the excessive burden on respondents and restrictive budgets of official statistics producers.

5. What is the periodicity of the WBI?

The WBI is released annually with final data for year n-2 and preliminary data for year n-1.

6. There are already many economic and social indicators produced within the National Statistical System (NSS). Why release a new index?

The well-being phenomenon is multidimensional – the index provides a one-dimensional representation of well-being, with loss of information, but considerable gains in terms of interpretation of this phenomenon’s evolution, with inputs from multiple inter-related factors (domains). John Kenneth Galbraith, a renowned economist, once said, “If you don't count it, it doesn't count”. In fact, well-being measurement will stimulate reflection and debate. It integrates a great amount of information revealing the strengths and weaknesses among the key factors of population well-being. This is particularly relevant in times of crisis.

7. Why does one resort to composite indices instead of using a panel of indicators?

It is always possible to assess the evolution of the indicators in the period under review. However, the choice of a composite index entails a series of advantages:
a) it allows interpretation gains essential to understanding the subject in question;
b) it enables an integrated and decompartmentalised understanding of the well-being phenomenon, as in real life compartmentalising turns out to be artificial. Using a composite index facilitates a systemic approach to the well-being issue: for example, several international studies confirm that population health is particularly associated with income levels and educational attainment;
c) it generates flexibility for users with different demanding needs to access the content behind the construction of the WBI. For some, it will suffice to capture overall developments, main origins and perhaps the evolution of the two major perspectives (material living conditions and quality of life). For others, it will be possible to select one or more domains, analysing index developments and getting summaries about such subjects.
In sum, recourse to composite indices with a greater or lower breakdown will make it possible to answer numerous questions, thus emphasizing its supporting statistics.

8. What is a composite index?

A composite index integrates a certain number of different indicators into a single indicator, whose evolution towards higher or lower values supplies a simple and fast answer about existing of a positive or negative evolution of the subject in question. In fact, based on the composite index one can assess the percentage change in a period and in a domain and perhaps compare it with the change in another period or another domain under review.

9. How is the WBI related to GDP?

GDP is a highly relevant macroeconomic indicator comparable at world scale and reflects economic wealth produced in the country. The WBI is a complementary information – the focus on measuring a person’s well-being, in a sustainability context is added to the focus on the economic production measure. In fact, GDP is not the only reference for the characterisation of well-being, and was not even designed for that purpose, since the paradigms behind GDP and WBI are distinct.

10. How were the 10 domains and their 79 indicators identified?

The main components explaining developments in a population’s well-being have been dissected by extensive literature, mostly produced in the past 10 years. The OECD and Eurostat have been leading this process, validating a list of domains largely common to the WBI domains. WBI took also into account the country’s socio-economic reality. For each domain, analysis dimensions have been inventoried, i.e. sub-themes that had to be monitored for a better characterisation of the theme’s evolution. Only then was a process started to select distinctive indicators for each of the analysis dimensions. For that purpose, constructing the WBI benefited from inputs from renowned experts in the 10 themes considered and inputs from the members of the Standing Section of Social Statistics within the Statistical Council.

The indicator selection process depended on information available for the period under review and for future years. It was not possible to collect statistics for some dimensions initially considered. In those cases recommendations were made for future development, at the level of statistical production and in liaison with National Statistical System entities.

11. What is the significance of the ‘quality of life’ perspective?

Quoting a paragraph from the Stiglitz-Sen-Fitoussi report:
“Quality of life is a broader concept than economic production and living standards. It includes the full range of factors that influences what we value in living, reaching beyond its material side. While some extensions of economic accounting allow including some elements that shape quality of life in conventional measures of economic well-being, every approach based on resources (or on people’s command over commodities) remains limited in important ways. First, resources are means that are transformed into well-being in ways that differ across people: individuals with greater capacities for enjoyment or greater abilities for achievement in valuable domains of life may be better off even if they command fewer economic resources. Second, many resources are not marketed, and even when they are, prices will differ across individuals, making it problematic to compare real income across people. Finally, many of the determinants of human well-being are aspects of people’s life-circumstances.”

12. Why has 2004 been chosen as base year?

An important suite of indicators from the survey on Statistics on Income and Living Conditions (EU-SILC) was produced annually from 2004 onwards. Inclusion of these indicators was crucial to the start of the WBI series.

13. Why is the same weight assigned to each domain? And why is the same weight assigned to each indicator in a domain?

The choice was to assign the same weight to each indicator for each domain, not only because a rationale was identified to warrant such option, but also to the simple reason that it was not found a clear and objective justification to assign different weights to each indicator. A version of Laplace’s Principle of Insufficient Reason advises that when a sufficient reason to state with precision how any indicator is more important than any other is absent, each indicator should be assigned the same weight.
Similar arguments warrant assignment of the same weight to all domains considered. Each domain contributes with the same weight to the computation of well-being, regardless of the number of variables integrating it. In fact, it is also not possible to have a rationale to make a quantitative distinction of the relative importance of domains.