Future of work

Key takeaways

• GDP (gross domestic product) is often criticized as a measure of societal well-being because it does not fully capture progress from new inventions and technologies, improvements in quality of life, and other factors that affect well-being. In particular, GDP can understate real improvements in well-being. For example, people may receive better-quality health care, but the improvement doesn’t lead them to consume more health care.
• The study proposes using the VSL measure as a proxy for a person’s expected lifetime well-being at a given point in time, offering an alternative way to think about living standards. This approach relies on assumptions about rates of return and how much future consumption is discounted relative to current consumption.
• While there is no infallible way of measuring well-being, the authors encourage a rethinking of how to capture it in order to incorporate elements that may be overlooked using traditional methods.

Plain language summary

Economists have long used GDP (the total value of goods and services that a country produces) as the go-to tool to measure how well-off people are and to compare well-being across time. But in this study, two economists argue that GDP can be seriously misleading.

To demonstrate this, the study uses a hypothetical example of an economy that produces only food—an industry where productivity grows at a rate of 5% every year. Then a new form of entertainment (string quartets) is invented, and people start devoting more of their spending to these performances rather than to additional food. Because productivity in this new sector grows more slowly, overall economic growth slows down—even though people are actually better off. Over time, GDP is lower than it would have been if the new form of entertainment had never been invented, even though people’s well-being is higher.

The problem gets bigger with real-world examples like smartphones, air conditioning, or antibiotics. GDP struggles to capture how much value a new invention adds to people’s lives because conventional measures have difficulty capturing the full value of new goods and improvements in quality of life.

The researchers propose an alternative measurement approach—the VSL—that tracks how much people are willing to pay to reduce small risks to their lives. The logic is that what people are willing to give up to reduce their risk of mortality reveals how much they value their remaining lifetime.

This measure would capture new inventions, better health, and other improvements that GDP may not fully capture.

Applying this method to 84 years of U.S. data (1940–2024), the study finds that people’s overall well-being appears to have grown much more than traditional economic measures suggest: it estimates that lifetime utility increased five- to sevenfold, compared with roughly doubling under conventional consumption-based approaches.

However, this estimate is sensitive to several assumptions, including the growth rate of VSL, interest rates, and how much people value present consumption relative to future consumption. Under different reasonable assumptions, the estimate could even suggest that well-being has declined since 1940. This potential outcome leads the authors to position the findings as suggestive rather than definitive.

Overall, the paper does not claim to offer a definitive approach to measuring well-being changes over time. Instead, it suggests a new tool to measure these changes while challenging conventional ideas about the reliability of GDP as a measure of well-being and inviting other methods of analysis.

Why the results matter

For researchers

VSL estimates can be derived from labour market data—specifically, compensating wage differentials, or the extra pay workers demand to take on riskier jobs. Using VSL as a tool and improving the data used to estimate it could contribute to our understanding of how overall well-being changes over time. It also raises questions that are relevant to labour research, such as whether the risk premium embedded in wages differs across income groups, industries, or education levels, and what that means for measuring inequality in well-being, not just inequality in income.

For general audiences and policymakers

The findings suggest that the arrival of new medical treatments, safer workplaces, and better technologies has led to higher life expectancies and greater well-being over time. The amount that workers are willing to pay to reduce mortality risk—or the amount they require in compensation for accepting those risks—has risen substantially. This provides information about changes in well-being that income alone may not capture. This is a consideration for policymakers when thinking about minimum wage policies and other rights associated with worker well-being, such as workplace safety standards, time off, overtime, and more. More comprehensive measures of well-being could help policymakers assess whether improvements in economic statistics truly reflect meaningful improvements in people’s lives.