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measuring Scotland's progress towards A SMART, SUCCESSFUL SCOTLAND
overall objectives
1 - GDP PER HEAD
Why this measure?
GDP per head is the most widely used measure of living standards. Its method of calculation can be standardised across countries to allow accurate comparison of the value of goods and services produced within a country's economy in a given year relative to the population of that country. It does not wholly capture the benefits of economic growth, as it does not measure the value attached to natural resources and other aspects of life that may not have a monetary value. It must also be remembered that it does not measure how the benefits of growth are dispersed amongst society.
How does Scotland perform?
GDP per head (2001)
In order to make a comparison with other countries the GDP per capita figures had to be standardised and presented in the same unit - 2001 US dollars. Scotland has a GDP per capita of $23,622, placing it in the third quartile - the same as last year - of a 31-country sample along with the UK and Finland. The first quartile was led by Luxembourg and also included the USA and Ireland. But the position of Ireland may reflect the consequences of transfer pricing 1 by the large number of multi-national companies present in that country. Luxembourg's high position may be due to the dominance of externally-owned banks and financial institutions.
UK GDP per head has been around the OECD average since the 1960s. Scotland's GDP per head has risen relative to the UK since the 1960s and was higher than that of the UK in 1995. This may have been because the recession of the early 1990s was less severe in Scotland than in some parts of the UK and as a result Scotland came out of recession sooner. Since 1995 a lower GDP growth rate in Scotland has led to a slower increase in GDP per head than in the UK as a whole. Over the past two years the recession in the world ICT and electronics industry has had a disproportionate impact on Scotland due to the high level of importance here of those sectors. Output and jobs have suffered as a result.
What does this mean for Scotland?
Scotland's GDP per head is behind that of the UK. Key determinants of GDP per head are the employment rate and productivity per worker. In Scotland both these measures are below those of the UK. Scotland's participation rate in the workforce is less than that of the UK and Scotland also has a greater ratio of part-time to full-time workers: both these will act to lower Scotland's GDP per head.
The effect on GDP growth of the downturn in the world electronics industry also highlights Scotland's vulnerability as a small open economy to external events affecting those sectors in which Scotland specialises. But in the longer term Scotland's GDP per head depends on the success achieved by Scottish businesses in undertaking R&D, starting new firms, adopting new methods of doing business, introducing new products and processes and in training the workforce. Other measures within this document chart Scotland's progress in these areas.
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