Living standards – overtaking the USA in the slow lane?

In the 1990s UK living standards were estimated to be 4% below those of the USA, 33% less than in Germany and 26% lower than those in France. However, faster economic growth in the past two decades has, according to Oxford Economics, led to average incomes overtaking those in the USA and rising some 8% more than those of France and Germany.

UK living standards outstrip US Times Online (6/1/08)
…but at least we’ve got one up on the Yanks Guardian (6/1/08)


1. Explain the difference that the value of sterling makes to the measure of the standard of living.
2. “With an adjustment made for this “purchasing power parity”, the average American has more spending power than his UK counterpart and pays lower taxes”. Define what is meant by purchasing power parity (PPP). Why does the standard of living need to be measured at PPS rates?
3. Discuss the principal factors that have led to the increase in the standard of living in the UK.