This week, Canada learned that it has dropped out of the top ten and into 11th place in the United Nations' annual Human Development Index (HDI). The change has raised calls for the government to focus less on deficit reduction and more on education and income inequality in its upcoming budget -- two areas that helped propel us downward on the UN's chart. But does that make sense? Canada was penalized in the HDI because the average years of schooling our citizens complete has not risen since 2005; yet that average happens to stand at 12.3 years, which could very well be as high as we want it to get (or close to it) to avoid falling into the trap of boasting an over-educated but under-trained populace. Perhaps our economy would actually benefit from fewer university grads and a greater number of apprentices, even though such a change would hurt us in the HDI.
Of course, income inequality can be a demoralizing and divisive force in society. But even there, we should be careful to ask ourselves what the measure is capturing. As Will Wilkinson pointed out in a thoughtful analysis several years ago, what really drives a wedge between the rich and poor of a country is massive gulfs in real standards of living and what a rich vs. poor individual is able to buy for himself and his family, rather than income, and on that count the picture is rather less bleak. The Atlantic's Megan McArdle summarized the point nicely at the time:
"If the rich have access to broad classes of goods that the poor can't have, I find this worrying. On the other hand, if the problem is that Bill Gates has a really awesome 80 inch flat panel television, while the poor have to be content with a 32 inch CRT, well, I can't say my heartstrings are plucked very tight by this injustice."
The HDI is useful when looked at as a very broad-strokes measure of where countries on stand health, education and income. Whether a nation comes in 11th or 60th is a meaningful distinction. But given the limitations of the metrics, and the fact that improvement rather than raw numbers is what drives a high placement, sweating the smaller differences in rankings is pretty silly. For the sake of Canada's economy, I'm hoping Finance Minister Jim Flaherty thinks so too.
