Measuring Well-being: HDI, GDP, and Links to Sustainable Development Goals

How do we know if a country’s people are truly doing well? For decades, the answer was deceptively simple: look at GDP. But gross domestic product tells you how much a country produces, not whether its people live long, healthy, educated lives. This gap between economic output and actual human flourishing has driven economists, the United Nations, and development researchers to develop more meaningful measures – from the Measure of Economic Welfare to the Human Development Index – and to connect these measures directly to the Sustainable Development Goals (SDGs). Understanding how well-being is measured, and why that measurement matters, is central to achieving a sustainable world by 2030.

Why GDP falls short as a well-being measure 🔗

GDP was designed in the 1930s to quantify the size of a national economy – the total value of goods and services produced within a country. It does this job well. What it does not do is tell us whether people are healthy, educated, or secure. As the late U.S. Senator Robert F. Kennedy famously noted, GDP measures everything “except that which makes life worthwhile.” This critique, cited by the UN Development Programme, reflects a growing consensus: economic growth and well-being are not the same thing.

The Gulf states illustrate this perfectly. Several have very high GDPs driven by oil revenues, yet their HDI rankings fall well behind countries with lower national incomes but better health and education systems. Conversely, countries like Chile and Barbados achieve higher HDI scores relative to their GDP, suggesting that how a country invests its resources matters far more than how much it produces.

MEW and ISEW: early alternatives to GDP 🔗

Recognition of GDP’s limits is not new. In 1972, Yale economists William Nordhaus and James Tobin introduced the Measure of Economic Welfare (MEW), which adjusted national output to include the value of leisure time, unpaid domestic work, and the environmental damage caused by industrial production. The MEW showed that welfare had grown more slowly than GDP in the United States – an early signal that economic expansion and human progress diverge. MEW can be seen as the forerunner of later, more sophisticated welfare indices.

Building on this foundation, ecological economists Herman Daly and John B. Cobb developed the Index of Sustainable Economic Welfare (ISEW) in 1989. The ISEW starts from personal consumption but adjusts it upward for unpaid household labour and non-defensive public spending, while subtracting the costs of environmental degradation, income inequality, and resource depletion. Research published in Discover Sustainability confirms that ISEW applications across multiple countries consistently reveal a significant and growing gap between GDP figures and actual sustainable welfare – a gap that widens especially after the 1970s in high-income economies. Neither MEW nor ISEW is a perfect measure, but both demonstrate that single-number economic metrics routinely overstate genuine human progress.

The Human Development Index: a people-centred alternative 🔗

The most widely used alternative to GDP for measuring well-being at the national level is the Human Development Index (HDI), introduced by the United Nations Development Programme in 1990. Pakistani economist Mahbub ul-Haq conceived the HDI with an explicit purpose: to shift the focus of development thinking from national income accounting to people-centred outcomes. His guiding conviction was that development should be measured not by what economies produce, but by what people can be and do.

According to the UNDP, the HDI captures three core dimensions of human development: a long and healthy life, access to knowledge, and a decent standard of living. Each dimension is measured by specific indicators – life expectancy at birth for health; mean years of schooling for adults and expected years of schooling for children for education; and gross national income per capita for living standards.

How the HDI is calculated 🔗

Each of the three dimensions is first normalized to a scale between 0 and 1 using fixed minimum and maximum values. For education, the goalposts are 0 and 18 years for expected schooling, and 0 to 15 years for mean schooling. For income, GNI per capita ranges from $100 to $75,000 in purchasing-power-parity terms, and is applied on a logarithmic scale to reflect the diminishing importance of additional income at higher levels. The three normalized dimension indices are then combined using a geometric mean, which means that a low score in any one dimension cannot be fully compensated by high scores in the others. This design ensures the HDI captures genuine, balanced development rather than rewarding countries that excel in income alone while neglecting health or education.

The HDI is not without its limitations. It does not capture inequality within countries, levels of empowerment, or environmental sustainability. The UNDP has developed supplementary indices – including the Inequality-adjusted HDI (IHDI), the Gender Development Index (GDI), and the Planetary Pressures-adjusted HDI (PHDI) – to address some of these gaps. The PHDI, for instance, adjusts HDI scores downward for countries whose development comes at the cost of high carbon emissions or heavy resource use, directly connecting human progress to ecological limits.

SDGs and well-being: a deeply connected framework 🔗

The 17 Sustainable Development Goals, adopted by all 193 UN member states in 2015, are not simply a policy wishlist. They are a structured framework for achieving well-being in its fullest sense – economic, social, and environmental. Many of the SDGs map directly onto the dimensions measured by the HDI. UNDP analysis shows that if a country’s HDI is improving, it is very likely that SDGs covering poverty (Goal 1), health (Goal 3), education (Goal 4), and decent work (Goal 8) are progressing too.

The connections run deep. SDG 3 targets universal health coverage and aims to reduce the global maternal mortality ratio to fewer than 70 deaths per 100,000 live births by 2030. SDG 4 calls for inclusive, quality education for all, recognizing that education drives poverty reduction, gender equality, and healthier communities simultaneously. SDG 8 connects decent work and economic growth to living standards – the third pillar of the HDI. When one of these goals advances, it typically accelerates progress on the others, making SDG achievement a mutually reinforcing process rather than a set of isolated targets.

Case study: SDG 5 and gender equality 🔗

SDG 5 – Achieve gender equality and empower all women and girls – is one of the most cross-cutting goals in the entire 2030 Agenda. Progress here directly affects outcomes in health, education, economic participation, and governance. Research from the SDG Knowledge Hub highlights that women’s access to sexual and reproductive health services is directly tied to reductions in maternal mortality under SDG 3, and that women’s lack of autonomy over their health limits their educational outcomes (SDG 4), access to sanitation (SDG 6), and employment (SDG 8).

Some areas have seen measurable progress. Between 2000 and 2023, global maternal mortality declined by 40 per cent, from 328 to 197 deaths per 100,000 live births. Women’s labour force participation among prime-aged women rose from 62.8 per cent in 2015 to 64.5 per cent in 2024. Girls have surpassed boys in school enrolment and completion rates in many regions.

But the gaps that remain are stark. According to the United Nations, at the current pace of progress it would take approximately 140 years for women to be represented equally in leadership roles in the workplace, and 47 years to achieve equal representation in national parliaments. In 2024, 61 of 131 countries surveyed still had at least one legal restriction preventing women from doing the same jobs as men. Child marriage and female genital mutilation are declining, but not fast enough to keep pace with population growth. The UN’s SDG 5 progress report notes that achieving gender parity in managerial positions, at current rates, will take 176 years. This is not a peripheral equity concern – it is a fundamental obstacle to sustainable development across every other goal.

Persistent challenges: SDG 6, SDG 8, and the gaps in global well-being 🔗

Despite decades of progress, significant disparities persist in areas central to human well-being. SDG 6 – clean water and sanitation for all – remains off-track in many parts of the world. One in four households globally lacks access to safely managed drinking water within their homes, and the burden of water collection falls disproportionately on women and girls. UN Women data shows that in roughly four out of five households without piped water, it is women and girls who travel to fetch water – limiting their time for education and income-generating work, and often causing chronic physical harm.

SDG 8 – decent work and economic growth – faces its own challenges. While global unemployment fell to 5.4 per cent in 2022 as economies recovered from the COVID-19 pandemic, the United Nations notes that informal employment is rising, youth unemployment remains elevated, and gender pay gaps persist across nearly all regions. Inequality – tracked under SDG 10 – has actually widened according to multiple indicators since 2015, making it one of the most consistently underperforming goals in the entire framework.

The COVID-19 pandemic compounded these challenges significantly, reversing gains in health, education, and poverty reduction simultaneously. It also exposed how tightly interwoven the SDGs truly are: a health crisis became an education crisis, a poverty crisis, and a gender equality crisis in rapid succession. This interconnectedness is precisely why well-being cannot be measured – or achieved – through a single economic indicator like GDP.

From measurement to action 🔗

The evolution from GDP to MEW to ISEW to HDI reflects a growing recognition that economic output is a means, not an end. True well-being encompasses health, education, equality, environmental sustainability, and human dignity – dimensions that market transactions cannot capture. The HDI, despite its limitations, remains one of the most practical tools for tracking broad development progress and for holding governments accountable to the human outcomes that the SDGs demand.

The SDGs, with their 17 goals, 169 targets, and 232 indicators, provide the most comprehensive framework ever assembled for defining and pursuing global well-being. But as SDG Action notes, understanding progress requires moving beyond complexity to simple, honest indicators – ones that tell us not just how economies are growing, but whether people are living longer, learning more, and living with greater dignity and freedom.

What do you think? If GDP is so clearly limited as a measure of well-being, why do most governments still rely on it as their primary indicator of national progress? And given the deep connections between SDG 5 (gender equality) and almost every other SDG, should gender equality be treated as the foundational goal rather than one goal among seventeen?

References

1. https://hdr.undp.org/content/human-development-and-sdgs
2. https://sdg-action.org/the-human-development-index-a-better-indicator-for-success/
3. https://www.economicsonline.co.uk/global_economics/measure_of_economic_welfare_mew.html/
4. https://link.springer.com/article/10.1007/s43621-024-00357-5
5. https://hdr.undp.org/data-center/human-development-index
6. https://ourworldindata.org/human-development-index
7. https://www.regenerativeeconomics.earth/regenerative-economics-textbook/5-the-state/5-3-rethinking-economic-goals-of-the-state/5-3-7-wellbeing-indicators
8. https://www.undp.org/sustainable-development-goals/gender-equality
9. https://sdg.iisd.org/commentary/policy-briefs/achieve-gender-equality-to-deliver-the-sdgs/
10. https://desapublications.un.org/file/21505/download
11. https://www.un.org/sustainabledevelopment/gender-equality/
12. https://sdgs.un.org/goals/goal5
13. https://www.unwomen.org/en/resources/gender-snapshot/sdg-6
14. https://www.un.org/en/exhibits/page/sdgs-17-goals-transform-world