It’s an age old question; can you buy happiness, or is happiness, or more generally well-being, something which no amount of money can bring. In fact can we even say that money is bad for well-being? The debate infusing years of popular culture, art and literature – whilst Abba Sang that it was “Always sunny/ In the Rich man’s world” F. Scott Fitzgerald’s (1934) novel Tender is the Night highlighted the corrosive effect of money upon individuals well-being through it’s description of the fates which befall it’s super-rich characters.
More recently Oliver James, the Psychologist behind the 2007 hit-book Affluenza points out that
If money engendered well-being, millionaires would be the most contented folk on the planet as well as the richest. The only studies to have specifically investigated this question, both American, suggest this is not so. In the first, over one-third of a sample of super-rich people (those with a net wealth of £70 million or more) were less happy than the national average
As is the case with James’s super-rich well-being in general has until recently been a rather under-researched area, however the increased recognition that GDP alone is not a sufficient marker of progress has led to a number of statistical organisations to attempt to gauge individuals satisfaction with their lives, in the process making available a range of data for the first time which has been collected using robust methodologies and often, relatively large sample sizes. So can we now answer the question – does money bring happiness, or misery, and not just for the super-rich, but for us all?
Are richer countries happier?
The first place to look is at the national level. There are vast discrepancies between the wealth of nations, so do people in richer countries on average report higher levels of well-being? Using data from UN Human Development Reports it is possible to plot the relationship between a measure of wealth (in this case GNI per Capita) and reported levels of life satisfaction.
As we can see there appears to be a positive relationship between GNI and life satisfaction levels. Countries with a higher GNI tend to have a higher life-satisfaction rating; Canada for instance with a 2010 GNI of 34 729 has an overall level of life-satisfaction of 7.7, whereas Togo with a GNI of only 789 has a correspondingly lower level of overall life-satisfaction at 2.8. The graph shows however, that at a point very roughly around $35 000 GNI per capita the relatonship breaks-down and that higher levels of GNI are not associated with higher life-satisfaction scores.
In following this pattern life-satisfaction seems to conform with a range of other indicators such as life expectancy in which increases in a nations wealth results in improvements in outcomes, however this effect comes to an end when a certain point of development is reached, up until this point increased wealth, enables a greater range of basic needs to be met such as housing and healthcare, but once these are met then there is little role for money in increasing well-being, we must search for other factors.
The Better-Life Index
The OECD Better life index is one such attempt at bringing together data on income, life satisfaction, work-life balance, community and the environment. One way of exploring the relationship between money and happiness is to look at the relationship between the measures of life-satisfaction and household income:
As we can see ,when making a cross-country comparison of OECD countries it appears there is a moderate correlation between household income and life-satisfaction. R = 0.56 which puts the relationship at the moderate level – by comparison the correlation between life satisfaction and percentage of employees working long hours is -0.11 and the correlation with time spent on leisure, or personal care is 0.19. It also seems to matter little how wealth is distriuted within a country; using data from the UN Human Development Report it seems that income inequality has no correlation with the average levels of life satisfaction R = -0.06
The OECD data on average life satisfaction do however vary within many countries according to social status. The OECD Better Life Index website reports that in the UK for instance the bottom 20% of the British population have an average life satisfaction level of 6.8 whilst the top 20% have a score of 7.2 , and in Estonia the figures are 4.3 and 6.8 respectively.
Well-being and personal incomes
Some recent work carried out by the Office for National Statistics also found that those with the lowest personal incomes reported, on average, the lowest levels of life-satisfaction and lowest scores in response to questions about the extent to which the things they do in life are worthwhile and happiness yesterday as well as recording the highest levels of anxiety compared to other income groups. Generally speaking the scores improve as the income scale rises, with the biggest gains coming between the groups £4160 – £11439 and £11440 – £15 599 though interestingly (especially with regards to Oliver James’s theories in Affluenza) those in the highest income category £49 400 + scored worse in life satisfaction and worthwhile than the category below £39 000 – 49 399, whilst having the same happiness score and anxiety score. It is necessary to mention however, that the ONS point out the data is experimental and comes from a low sample size.
Statistics from the 2010 New Zealand General Social Survey also appear to show a pattern where persons with higher personal and household income also report higher levels of well-being. Using a 5 point Likert Scale to measure life-satisfaction the Statistics New Zealand website reports that
Satisfaction with life increased with household income level. However, the largest increase in life satisfaction occurred between the two lowest household income groups (‘$30,000 or less’ and ‘$30,001– $70,000’), with progressively smaller increases in life satisfaction at higher income groups.
This is interesting, as like the ONS data it also suggests that the biggest step in terms of life-satisfaction takes place toward the bottom end of the income scale and that at the upper end of the income scale life-satisfaction appears to be closer to, or even lower than income groups below. There is of course a good reason for this. As everyone knows professional football players are some of the best-paid individuals in the UK. As a player at the height of his powers Matt Le Tissier could command an astronomical salary, however chose to stay with one club, Southampton, despite the fact that other clubs could, and would pay much more. In his autobiography Le Tissier reasons:
You can’t blame players for taking that sort of money if it’s offered, but there comes a time when you have to wonder how much money someone can actually spend? If you are already on £30 000 a week, what else could you buy if you get £40 000?
For Le Tissier it was more important to stay at a club where he was happy rather than take the extra money, it was very much a case of putting well-being above money, not that as Le Tissier concedes he was badly paid, but the point he makes applies equally to less spectacular amounts, how much can one person spend? Certainly moving from a low to a moderate income can bring about major changes; you can afford maybe a better car, a holiday, trips to restaurants and the cinema, most importantly you are relived the stress associated with struggling to pay bills and essentials. Moving from a high to a very high income, on the other hand doesn’t entail that much change wheras you may need to make more sacrifices, or trade-offs to earn more; longer hours, moving away from family and friends, a commute, or
The Easterlin Paradox
A particularly interesting observation from the OECD report ‘How’s Life?: Measuring Well-being’ suggests that this relationship between income and well-being is a little more complex; The Easterlin Paradox, first observed by Richard Easterlin in 1974, suggests, according to report, that:
a higher rise in personal income leads to higher subjective well-being for that person, but that a rise in average incomes for a country does not give rise to a corresponding increase in the country’s average subjective well-being
In other words it is not necessarily increases in income per se which increase well-being, rather it is the increase in income relative to the rest of the population. So in terms of the step we have previously mentioned, an increase in life-satisfaction from moving from a household income of under $30 000 NZD to say $45 000 NZD is much likely to be the case when applied to an individual household, rather than all households in that group.
One final observation of interest. When comparing areas within the UK there appears to be no relationship between an areas level of wealth and well-being. Most famously, London, the economic powerhouse of the UK, seems to do particularly badly when it comes to indicators of well-being. This is discussed more fully in a previous post, but one possible line of explanation is that the particular economic and social conditions arising from the global city form may be detrimental for well-being.
From this short review can we say that money buys happiness? It certainly appears to be the case on both a national level and an individual level that higher incomes are correlated with higher levels of reported well-being. Certainly it seems that being towards the bottom end of the income range is particularly bad for well-being. This appears to have much to do with the income required to provide for basic human needs such as food, warmth, shelter, education and healthcare, or the income required to participate fully in society. Once these have been attained then the effect of income in terms of increasing well-being seems to be less potent, and there is even some limited evidence to suggest that having a very high income is actually detrimental to well-being.
Policy implications : To redistribute, or not?
The Easterlin paradox is also rather interesting in that it points to a more complex relationship between well-being and income. Raising the overall average level of well-being is not therefore simply a matter of increasing income among the bottom groups, primarily by redistribution, however, according to the paradox this would be rather limited in effect and even any small gains would be counteracted by the losses to well-being incurred by other groups.
This does not mean to say that re-distribution is necessarily wrong, as statistics New Zealand suggest:
In addition to lower life satisfaction, people in lower income households were more likely to report feeling unsafe walking alone in their neighbourhood at night and to say they had ‘fair or poor’ health than people in higher income households.
It has long been held that low income has been associated with various types of disadvantage; housing, health and education to name a few. It could well be that it is not low income itself which results in low well-being, but these other factors associated with low income. This would explain, in part, why overall rises in average incomes have little impact, compared to individual rises. A rise in the average, whilst improving some material conditions e.g more televisions, has little effect on things such as housing, whereas a rise in an individuals household income may mean the opportunity to move to a better neighbourhood with a better school, or better access to health-care facilities. In other words in developed industrial societies everyone may have a fridge, T.V and mobile phone, but poverty and disadvantage remain entrenched and their effects real.
As mentioned, there is also some, albeit limited, evidence that having a very high income has a detrimental affect on well-being. The obvious solution in this case would be to give away large parts of wealth. Could this explain the impulse to philanthropy among members of the super-rich past and present? Is this charitable giving an attempt to mitigate the negative impact of high-income on well-being , or at the very least an acknowledgement that both globally and individually a more even distribution of wealth is desirable
Can statistics make you happy? Maybe if you’re a stats geek like me, but seriously can the path to happiness, or at least some insights into the path to follow be found through the use of statistics? The Office for National Statistics (ONS) have been engaged in work to create a quantitative measure of our national well-being and despite some criticisms in the mainstream media, along the lines that in many cases it was either pointless, or a case of stating the obvious, the work, carried out on a large scale, has produced some interesting results and points to a number of areas for future research. As the well-being data has been collected through the Labour Force Survey the analysis so far seems particularly revealing about the work we do, or indeed don’t do (though this is perhaps also a weakness as the data reveals less about other non-work factors) and in this post I will be dealing primarily with these issues of work status, occupation type and their relationship with life-satisfaction.
The most immediately striking thing about the well-being stats is the affect of age. According to the ONS figures well-being follows a ‘u’ shaped curve according to age as shown by this graph referring to responses to the question ‘Overall, how satisfied are you with your life nowadays? in which respondents were asked to give a rating on a scale of 0 -10 with 0 being not at all and 10 being completely.
What could be the reasons for this similarly high ratings given by members of the older and younger age group? One thing both groups also have in common is their level of satisfaction of the amount of free time they have. When asked ‘if they were satisfied with the amount of time to do the things that they like doing’ both younger and older people reported the highest levels of satisfaction.
It is quite likely that these higher levels are chiefly because both groups are less likely to have family commitments, or to be engaged in paid-work; For younger people this is because they are still in education, whilst for the older age group many of those aged 65+ will be retired from paid-work.
As a slight aside an interesting observation is that whilst in general life satisfaction appears to increase with age, this actually declines for the 80+ age group. There may be a number of possible explanations for this; one being poor health, which is in the ONS analysis also implicated in lower levels of well-being, or an alternative may be that social capital declines at this age leading to isolation.
So in terms of work is it that not working the answer to happiness? Well, not quite. The well-being statistics also showed that unemployment has a significantly detrimental impact on the level of well-being reported by an individual with 45% of unemployed people rating their life satisfaction as low (5-6), or very low (0-4). This compares with a much lower figure of 20% for people in employment whilst for economically inactive people this figure is 27.1% However, this latter category includes people who are caring for a relative, looking after children, or who are unable to work due to illness/disability along with students, the idle rich and retired people, who we may possibly expect to have higher ratings – indeed more people in the economically inactive group, some 30.5% also rated their life satisfaction as high (9-10) compared with 24.4% of employed people, and 16.3% of unemployed people suggesting this is a rather bifurcated group.
Because of this wide variation among the ‘Economically Inactive’ group it is particularly hard to reach any conclusion without breaking down the category and though we can clearly see that being employed is clearly far more preferable from a well-being perspective to being unemployed – something which may well be due to the stigma and low status of being in the unemployed group – an interesting comparison to make would be between the unemployed and the idle rich.
But can the type of work we do have an effect on well-being – yes, according to the ONS analysis which states that in terms of the ‘life satisfaction’ ratings, and sthe ‘how happy did you feel yesterday’ question.
higher scores appear to be given by the occupational groups who tend to have more responsibility and control over their work, as well as higher incomes (which were not controlled for in this analysis)
This seems to align the findings of the Whitehall II study, based on a sample of 10 308 civil servants, which found that low levels of control at work had a particularly detrimental effect on health. A (2004) pamphlet explaining the results of the research, which was carried out between 1985 and 1998, states:
While it is common for demands to increase as the occupational hierarchy is ascended, degree of control over work decreases with lower position. Whitehall II provides ample documentation of this: the lower the grade of employment, the less control over work. This combination of imbalance between demands and control predicted a range of illnesses. The evidence from Whitehall II suggested that low control was especially important. People in jobs characterised by low control had higher rates of sickness absence, of mental illness, of heart disease and pain in the lower back.
Whilst there is likely to be a correlation between level of control and remuneration as this was not controlled in the analysis it is not possible to tell form the data if higher levels of pay alone can increase well-being. One interesting finding however, is that those in the occupational group ‘caring, leisure and other service occupations’ as well as those in ‘professional occupations’ achieved the highest average response to the question ‘overall, to what extent do you feel the things you do in your life are worthwhile’ at 8 out of ten. the lowest averages were reported by ‘sales and customer service occupations’, ‘process plant and machine operatives’, and ‘elementary occupations’ who all averaged 7.5.
This would seem to suggest that work which involves a level of altruistic motivation, or else purports to serve a higher purpose, is beneficial for overall well-being, compared to work in which financial reward is the primary, or sole motivation. This finding is particularly relevant to questions into the role of social purpose, or public service in work and in organisations in general. Could it be that individual well-being is enhanced within organisations such as social enterprises, or other voluntary organisations where there is a strong sense of social mission?
In terms of the ONS well-being data it would appear that both younger and older persons, groups who due to their respective ages tend not to be engaged in full-time paid work, report both higher levels of life satisfaction, and higher levels of satisfaction with the time to do things. Though it is not necessarily the case that it is simply full-time work that results in lower levels of satisfaction in both measures for the other age groups, and it may certainly be the case that other commitments such as looking after children also play a role, it does seem possible that full-time work, can result in dissatisfaction with the time a person has to do things and this in turn may well be linked to the corresponding lower levels of reported well-being for these age groups. Certainly this is an area where future research may be directed as the ONS analysis does not include any details on the relationship between well-being and hours worked, or with a persons satisfaction, or not, with the hours they currently work.
Finally It is also important to note that the LFS does not collect data on voluntary work. It may be the case that, particularly among the retired group, voluntary work may play a key role in well-being. A 2005 Joseph Rowntree Foundation paper Volunteering in Retirement, suggests that voluntary work can be particularly beneficial for the health of retired people. As mentioned the ONS analysis seems to suggest that work which performs a higher purpose is beneficial to well being therefore it may be interesting in particular to analyse the role of voluntary work, or more widely make a comparison of well-being levels between workers in the voluntary, or public sector and the private sector.
Ferrie, J. (2004) Work, Stress and Health: the Whitehall II study CCSU/Cabinet Office
Office for National Statistics (2012) First ONS Annual Experimental Subjective Well-being Results 24th July 2012
Office for National Statistics (2012) Measuring National Well-being –
Measuring young people’s well-being 10th October 2012
Smith & Gay (2005) Active Ageing in Active Communities; Volunteering and the Transition to Retirement Bristol: The Policy Press