Towards the Construction of a Composite Indicator of Objective Individual Living Conditions for Europe

This paper provides an approach for constructing an index of objective individual living conditions which is based on micro data and comparable between countries and over time. It summarizes on the individual level how people’s lives are from diverse perspectives, which together form their "objective living conditions". As the name already indicates, the index particularly focuses on objective indicators, not taking into account subjective (cognitive or affective) perceptions of one’s own life, such as life satisfaction or happiness. The life domains that are included in the index are

- income / standard of living

- housing area

- health

- social relations

- work

Each domain incorporates a number of single indicators that describe this aspect as thoroughly as possible.

Constructing an index based on micro data has the advantage that the computation of the index for subgroups (e.g. by gender, age groups, etc.) is possible. In the lack of a micro data base for Europe that covers information on all the domains mentioned, the index combines three data sources: the EU-SILC, the ESS and the EU-LFS. At present it can be computed for a limited number of European countries for the years 2006, 2008 and 2010 (severely limited also for 2004).

First results of the index indicate that there is a high correlation between macro indicators of the economic strength of a country (e.g. GDP/capita) and the index as a whole, whereas certain domains of the index seem to be unrelated to those macro indicators. Particularly, this concerns the domains housing area and health. Hence, the indicator can give differentiated insight into the "performance" of countries concerning their population's objective living conditions.