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Current Indicators of the Living Costs are Deceptive

The standard of living is one of the key indicators of a country’s social and economic development. The exploration and analysis of the living costs is a relevant issue in both developed and developing economies.

Currently, according to Geostat, the national statistics service of Georgia reveals that the living costs of an able-bodied male is 157.30 GEL, while for an average family, it is 263.9 GEL. As to family categories, living costs of a one-member family is 139 GEL, a two-member family – 222.9 GEL and a three-member family – 250.8 GEL. Moreover, the cost of living of a four-member family is 278 GEL and a five-member family – 313 GEL. Families with six or more members require 370 GEL. Naturally, these living-cost indicators encounter criticism as these amounts are insufficient for a comfortable life.

In Georgia, the cost of living is calculated on the grounds of a minimum food basket. For determining the cost of living of an able-bodied male, Geostat applies a methodology under which a food basket includes the volume of food physiologically necessary for a normal life and working potential. Additionally, the food basket includes a minimum volume of its elements and calorific value.

The minimum food basket for an able-bodied male comprises of 40 products totaling 2300 kilo-calories. However, it should be noted that at least 2500 kilo-calories are required for daily consumption. Additionally, food products should be diversified.

Intense discussions are underway to revise the cost of living calculation methodology. Everyone agrees that the current methodology is very outdated and a faulty practice. However, the resolution to this problem lays far ahead. Moreover, it should be noted that an unbiased examination of the minimum food basket and cost of living does not depend on financial resources of the country.

The identification of the real living cost does not signify immediate revision of social packages. Cost of living signifies those priorities that the authorities should, gradually, embody in social policy.

When talking about the peculiarities of the living costs calculations, the multi-year dynamics of changes should be stressed. Under the ruling of United National Movement (UNM), the national improvement of social equality and the standard of living seemed to be one of the important priorities. However, it will not be far-fetched to say that the UNM social policy was a facade with nothing in common with the essential improvements of the social system. This suggestion is proved by the existing approaches to the issue of living costs. Namely, for many years, from 1997 to 2003, cost of living was growing and reached its peak in 2003 (130.7 GEL).

Last year, the cost of living declined 1.6 times following the decrease of the energetic value of food products and the replacement of expensive products by comparatively cheaper products. Simultaneously, the reduction of the monetary value of food baskets resulted in the reduction of living costs of an able-bodied male.

It should be noted that before 2003, the daily Georgian norm of calorie intake comprised of 2500 kilo-calories. After 2003, the daily norm reduced to 2300 kilo-calories. This reduction of living costs has preconditioned the considerable reduction of the poverty level. However, the reducing poverty level was not due to the lack of the improvement of living conditions, but rather the result of artificial interference.

Additionally, it should be noted that the proportion of food expenditures in the total sum of living costs is 70/30%. Physical food products account for 70% in total volume of the basket, while all other needs occupy 30%.

Contemporary experience suggests that, along with the improvement of living conditions around the world, similar proportion is very an outdated practice and in many European countries. This proportion constitutes 60/40 or even 50/50.

Therefore, it is necessary to recalculate these proportions to determine the genuine costs for agreeable living conditions and not for just physical survival.

Based on the Georgian reality, it is necessary that the national statistics service revise the existing methodology with the modern standards of calculation. Determining the real cost of living will essentially change the existing social policy and priorities. Pensions and minimum social allowances will be higher compared to the current situation. Although, it is difficult to name the accurate amounts of living costs, it is a technical issue and process in which various parties should be involved.

Moreover, it is inadmissible to protract removal of methodological gaps. Political desire and determination is required to tackle this issue. Consequently, it is implied that the authorities are disinterested in determining the living costs as the existing social policy will be overthrown. More so, in all the election periods, almost all political parties pledge to introduce new methodology to redefine the term ‘cost of living’.

It should be stressed that the shortcomings of the above-mentioned methodology, current indicators of cost of living is deceptive, as the existing situation in the country is extremely satisfactory. Consequently, the authorities should, urgently, determine the amounts necessary for a satisfying standard of living of Georgian citizens.