1 11th December 2006. 2 Happiness and Well-Being Across Nations Prof. David G. Blanchflower Bruce V. Rauner Professor of Economics Dartmouth College,

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New Perspectives on Job Satisfaction and Well-Being DTI’S FOURTH LABOUR MARKET RESEARCH CONFERENCE

ORGANISER: EMPLOYMENT MARKET ANALYSIS & RESEARCH (EMAR)

11th December 2006

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Happiness and Well-Being Across Nations

Prof. David G. Blanchflower

Bruce V. Rauner Professor of EconomicsDartmouth College, NBER and

Bank of England

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U.S. Declaration of Independence

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness."

July 4, 1776.

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The dismal science.. no longer

“…I should say, like some we have heard of, no, a dreary, desolate, and indeed, quite abject and distressing one, what we might call, by way of eminence, the dismal science”

Thomas Carlyle, 1849

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Using random samples of individualsa) Happiness (e.g. the US General Social Survey)

“Taken all together how would you say things are these days – would you say that you are very happy, pretty happy or not too happy?”

b) Life satisfaction (e.g. Eurobarometers)

“On the whole, are you very satisfied, fairly satisfied, not very satisfied, or not at all satisfied with the life you lead?”

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Reported happiness is correlated with…(1)

• Objective characteristics such as unemployment

• Person’s assessment of happiness by friends and family

• Person’s assessment of happiness by spouse

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Reported happiness is correlated with…(2)

• Heart rate and blood pressure measures response to stress

• The risk of getting coronary heart disease

• Duration of authentic or Duchenne smiles

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Reported happiness is correlated with…(3)

• Skin-resistance measures of response to stress

• Electroencephelogram measures of prefrontal brain activity.

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Some cheery news:

When asked ‘how dissatisfied or satisfied are you with your life overall’, most people say they are happy with their lives

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The distribution of life satisfaction levels among British people

Source: BHPS, 1997-2003

1=not satisfied at all…7=completely satisfied

0

5

10

15

20

25

30

35

Pe

rce

nta

ge

of

Po

pu

lati

on

1 2 3 4 5 6 7

Self-rated Life Satisfaction

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Happiness findings

Happiness is high among:

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Happiness findings

Happiness is high among:

WomenPeople with lots of friendsThe young and the oldMarried and cohabiting peopleThe highly educatedThe healthyThose with high incomeThe self-employed

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Happiness findings

Happiness is low among:

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Happiness findings Happiness is low among:

MenThe unemployedDivorced and separated peopleAdults in their mid to late 40s Minorities and immigrantsThose in poor healthCommuters

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Statistically, wellbeing is strongly correlated with life

events

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Two examples

Source: BHPS, 1997-2003. N = 74,481

A) By Employment Status

B) By Marital Status

4.20

4.40

4.60

4.80

5.00

5.20

5.40

Employed Unemployed

Av

era

ge

Lif

e S

ati

sfa

cti

on

4.95

5.00

5.05

5.10

5.15

5.20

5.25

5.30

5.35

5.40

Not Married Married

Av

era

ge

Lif

e S

ati

sfa

cti

on

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The pattern of a typical person’s happiness through life

4.9

5.0

5.1

5.2

5.3

5.4

5.5

5.6

15-20 21-30 31-40 41-50 51-60 61-70Age group

Ave

rag

e l

ife

sati

sfac

tio

n s

core

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What about money?

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What about money?

The data show that richer people are happier and healthier.

But…individuals are less happy if their incomes are far above those of the poorest people

Relative income matters

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What about money?

It would take a lot of money to ‘compensate’ for unemployment, or a lasting marriage

The money value of events like unemployment and divorce are large.

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I would like to spend more time with my family (% workers)?

USA 46% New Zealand 26%

Great Britain 36% Switzerland 23%

Sweden 32% Italy 21%

Norway 27% Netherlands 18%

Denmark 26% Japan 9%

Canada 26% Spain 8%

Source: Blanchflower and Oswald (2000a) and International Social Survey Programme, 1997

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What about happiness in whole countries?

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Macro-correlates

Happiness is negatively correlated with unemployment

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Life satisfaction and unemployment

Figure 1. Life satisfaction and Unemployment rate (2003)

Croatia

Turkey

Slovenia

Bulgaria

Poland

Malta

LatviaEstonia

HungarySlovakia

Czech RepublicCyprus

Romania

Austria

PortugalLithuania

Italy FranceBelgium

NetherlandsLuxembourg

Denmark

IrelandUK

Greece

SpainFinland

Sweden

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

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Macro-correlates

Happiness is also negatively correlated with inflation

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Life satisfaction and inflationFigure 2. Life satisfaction and Inflation (HICP, 12-month average, Dec 2003)

Croatia

Turkey

Slovenia

Bulgaria

Poland

Malta

LatviaEstonia

HungarySlovakia

Czech RepublicCyprus

Romania

Austria

PortugalLithuania

ItalyFranceBelgium

NetherlandsLuxembourg

Denmark

IrelandUK

Greece

SpainFinland

Sweden

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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Happiness and Growth

When a nation is poor, extra riches do raise happiness.

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When a nation is poor, extra riches do raise happiness.

Say we look at a scatter plot across many countries:

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TZA

NGA

UGA

MDA

BGD

PAKGEO

VNM

ZWE

IND

ARM

IDN

AZE

MAR

EGY

PHL

JOR

ALB

CHN

UKR

SLV

PER

VEN

BLR

BIHDZA

COL

TUR

MKD

IRN

DOM

ROMBGR

URYBRA

RUS

MEX

LVA

CHL

ZAF

HRV

LTU

POL

ARG

ESTSVK

HUN

CZE

KOR

MLT

PRTSVN

GRC

ISRESP

NZL

SGP

SWEGBRITA

FIN

JPN

FRA

DEUBEL

NLDAUTISLCAN

CHEDNK

USA

IRL

NORLUX

Australia

4

5

6

7

8

Life

Sat

isfa

ctio

n, W

VS

Ave

rage

Sco

re (

1='D

issa

tisfie

d' to

10=

'Sat

isfie

d')

2000 5000 10000 20000 35000 60000

GDP per capita in US$ at PPP (log scale)

Life Satisfaction = -0.9 + 0.8 * Log GDP (t=8.3)World Values Survey

Figure 3. Life Satisfaction and GDP Per Capita

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Poor countries

• Growth in income in poorer countries is correlated with growth in happiness

• Evidence is particularly strong in South America since 1997.

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South America life satisfaction - 4 point scale

1997 2004

Argentina 2.14 2.92Bolivia 1.97 2.40Brazil 2.38 2.67Chile 2.32 2.80Columbia 2.50 3.14Mexico 2.61 2.96Uruguay 2.40 2.73Venezuela 2.45 3.26Source: World Database of Happiness http://www1.eur.nl/fsw/happiness/hap_nat/nat_fp.htm

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Eastern Europe life satisfaction - 4 point scale

2001 2004

Czech Republic 2.14 2.92Hungary 2.54 2.52Latvia 2.54 2.64Lithuania 2.29 2.52Poland 2.65 2.78Romania 2.12 2.38 Slovakia 2.48 2.65Slovenia 3.04 3.10 Source: World Database of Happiness http://www1.eur.nl/fsw/happiness/hap_nat/nat_fp.htm

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Yet

• Growth in income in richer countries is not correlated with growth in happiness

• This is the “Easterlin paradox”

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Figure 4. 1995/2000 World Values Survey results

Life Satisfaction World Values Survey

Tanz

Nig

Uga

MOL

BAN

PAK

ZIM

Vietnam

India

MOR

ARM

ALB

SALV Ven

Ukr

AlgMacBela

Bosn

Colombia

Dom

Iran

Bulgaria

Bra

Rom

Uru

Mexico

Rus

S.AFR

Chile

Lat

CROA

Arg

Lit

ESTSloHun

MALT

CzePORTSlovenia GRE

New Zealand

IsrSpaSINGerItaly FRA

SWEFinAustralia UKBelgCan

DenNetherlands Austria ICESwi

NorUSIrl

0

1

2

3

4

5

6

7

8

9

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000GDP per capita, PPP (constant 2000 international $)

IND

EX

the western countries

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Figure 5. Average Happiness and Real GDP per Capita for repeated cross-sections of Americans.

1.8

22.

22.

42.

6M

ean

Ha

ppin

ess

150

0018

000

210

0024

000

Rea

l GD

P p

er C

apita

1975 1980 1985 1990 1995Year

Real GDP per Capita Mean Happiness

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Wellbeing is flat through time in the other rich countries

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Figure 6. Mean Life satisfaction scores, 1973-2004

2.7

2.8

2.9

3

3.1

3.2

3.3

3.4

3.5

1973197519771979198119831985198719891991199319951997199920012003

Time

Mea

n s

atis

fact

ion

sco

re

FranceNetherlandsWest GermanyUK

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and

In the USA both job satisfaction (scale 1-4) and happiness (scale 1-3) have been flat since 1972

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Figure 7. Job Satisfaction and Happiness, USA (General Social Surveys)

2

2.2

2.4

2.6

2.8

3

3.2

3.4

1972 1976 1980 1984 1988 1992 1996 2000 2004

Time

Mea

n s

core

s

Job satisfactionHappiness

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Are there diminishing returns to real income?

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Are there diminishing returns to real income?

Very probably yes.

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What, exactly, goes wrong when a wealthy country gets richer?

We are not certain, but..

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Some clues…

• Social comparison (you compare your 3 BMWs to people with 3 BMWs)

• Habituation: people adapt to money

• Mistaken choices (long commutes and working hours)

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Social Comparisons

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‘Happy’ countries

Denmark Ireland

Austria Norway

Sweden United States

Chile Switzerland

Mexico Netherlands

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‘Unhappy’ countries

Lithuania Poland

Latvia Hungary

Slovakia Russia

Czech Republic Italy

Turkey Bulgaria

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Blood pressure

• Denmark has the lowest reported levels of high blood pressure in our data

• Denmark also has the highest happiness levels

• Portugal has the highest reported blood pressure levels and the lowest levels of life satisfaction and happiness

Source: Blanchflower, D.G. and A.J. Oswald (2006d), "Hypertension and happiness across nations", working paper.

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What is the evidence then for the UK?

• Happiness and life satisfaction

• Job satisfaction

• General health

• Depression and anxiety

• Suicide

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UK happiness ranking

UK usually ranks below

Denmark SwedenNetherlands IrelandLuxembourg United StatesAustria New ZealandJapan Switzerland

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UK happiness ranking

UK usually ranks above

Former Soviet bloc countriesBelgiumFrancePortugalSpainItalyGermany

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Life satisfaction - UK

Mean scores (scale 1-4)

1973 3.15 2000 3.14

1978 3.16 2002 3.17

1988 3.21 2004 3.24

1998 3.16 2005 3.20

Source: Eurobarometers

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and

• Job satisfaction in the UK (and Germany) has fallen over time

• Job satisfaction trends in the Netherlands, Finland, Belgium, Austria, Denmark, France, Spain, Italy, Portugal and Greece are all approximately flat

*Francis Green and Nicholas Tsitsianis ‘Can the changing nature of jobs account for national trends in job satisfaction’,

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UK ranking on job satisfaction

UK (Tables 4 & 5) ranks below

Denmark SwedenNetherlands IrelandLuxembourg United StatesAustria New ZealandNorway SwitzerlandFinland Germany

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GHQ Scores - UK

• Stress as measured by the GHQ score has increased over time

• 199110.77 2001 11.31

• 199711.25 2002 11.17

• 200011.37 2004 11.16

Source: BHPS

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Figure 8. GHQ stress score, BHPS, 1991-2004

10

10.2

10.4

10.6

10.8

11

11.2

11.4

11.6

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Time

GH

G S

core

AllWorking

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Self-reported health - UK

Self-perceptions of health have been roughly constant since 1977 (GHS)

Good Fairly Good Not good• 1977 58 30 12• 1987 60 28 12• 1995 60 26 14• 1998 60 27 14• 2001 59 27 14• 2003 59 27 14

Source: General Household Survey, 1977-2003 and www.statistics.gov.uk/StatBase/Expodata/Spreadsheet/D8779.xls

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Figure 9. Health problems lasting more than 12 months

Source:

% of all employees

17

18

19

20

21

22

23

2000 2001 2002 2003 2004 2005 2006

Health problems lasting

more than 12 months

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Prevalence of neurotic disorders

1993 2000• Sleep problems 25 29*• Depression 10 12*• Concentration & forgetfulness 8 10*• Depressive ideas 9 10*• Worry about physical health 5 7*• Obsessions 9 6*• Compulsions 6 3*

• Source: Singleton et al (2001), Psychiatric Morbidity among Adults living in Private Households, 2000, Table 3.1. * implies difference is significant at 95% level.

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Figure 10. Trends in health problems and disability amongst employees

Source:

Percentage of all employees

(LFS, spring quarters)

0%

4%

8%

12%

16%

20%

24%

1998 2000 2002 2004 2006

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%Health problems (lhs)

A current disability (lhs)

Depression, nerves, mental illness, etc (rhs)

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Treatment/diagnosis of mental ill-health have increased

• Number of prescription items for anti-depressant drugs has increased from 9 million in 1991 to 27.7 million in 2003 (Social Trends, 36)

• Out of 407,000 receiving Disability Living Allowance in Feb 2005 15.2% were due to ‘mental health causes’

• But…23.2% of new awards of DLA in year to Feb 2005

Source: Disability Living Allowance Quarterly Statistics, Table 1, February 2005. Department of Work and Pensions

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Treatments for mental disorders increased in the 1990s

Depression Anxiety Men Women Men Women

1994 19.9 50.5 17.8 41.71996 25.0 60.8 20.9 47.41998 29.0 70.1 23.8 54.4

(rates/1000 patients)

Source: Bajekal, M. V. Osborne, M. Yar and H. Meltzer (2006), Focus on health, Palgrave, Macmillan, ONS

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‘Depression, bad nerves or anxiety’

• The proportion of the working population in the LFS that self-report suffering from ‘depression, bad nerves or anxiety’ has increased

UK Scotland• 1998 0.93% 1.33%• 2000 1.08% 1.34%• 2002 1.40% 1.92%• 2004 1.65% 2.03%• 2006Q1&2 1.66% 2.19%

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Figure 11a. Depression - regression coefficients, Males LFS 2004-2006Q2

-0.01

-0.005

0

0.005

0.01

0.015

0.02

1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990

Year of birth

Reg

ress

ion

co

effi

cien

t

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-0.014

-0.012

-0.01

-0.008

-0.006

-0.004

-0.002

0

0.002

1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990

Figure 11b. Depression - regression coefficients, Females LFS 2004-2006Q2

Year of birth

Reg

ress

ion

co

effi

cien

t

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Suicide

• Suicide rates (per 1000,000 population both sexes) have declined after peaking in 1998

UK Scotland

• 1991-1993 20.7 29.1• 1994-1996 19.2 32.6• 1996-1998 19.5 31.2• 1998-2000 20.8 32.8• 2000-2002 19.4 32.4• 2002-2004 18.3 30.0

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The Scots may be brave but they are neither healthy nor happy

• All ten of the suicide ‘hotspots’ in the UK are in Scotland

• Highest rates for men are in the Shetland Isles; Eilean Siar (Western Isles) and the Scottish Highlands

• High rates for men in other more rural areas West Dunbartonshire (5); Eas Ayrshire (6); Clackmannanshire (7); Moray (9); North Ayrshire (10); Inverclyde (14); Renfrewshire (15); Dumfries and Galloway (17); Scottish Borders (19)

• Source: A. Brock, A. Baker, C, Griffiths, ‘Suicide trends and geographic variations in the UK, 1991-2004’, Health Statistics Quarterly, 31, Autumn, 2006

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Summing up

Given our current real income levels:

Growth is not making the industrialized nations happier.

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The natural conclusion

Policy in the coming century will likely need to concentrate more on non-materialistic goals including health and well-being