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If life is getting worse then why are we so happy?

The Analyst

Last year I was asked to give a presentation on the challenges facing Western policymakers. We ranged widely across a depressing set of subjects, from stagnating incomes to inequality, public sector austerity, job insecurity and the rise of populism.

At the end of my presentation I was asked a simple question: “If things are this bad why is measured happiness in the UK at record levels?”. I gave an inadequate answer, mumbling about the benefits of low unemployment, and inwardly vowed to look into it. Here is what we found.

My questioner was right. Three different surveys and all tell the same story. Happiness has, indeed, been rising in the UK.

Last year the ONS’s (Office for National Statistics) measure of national wellbeing rose to its highest level since the survey started in 2012. The ONS survey about 150,000 people every year, asking, on a scale of 0 to 10, whether respondents are satisfied with their lives, whether they feel the things they do are worthwhile and how happy or anxious they felt yesterday. All of these measures except anxiety have steadily improved since 2012.

A longer running series, from the Resolution Foundation, shows that the proportion of people who say they are very or fairly satisfied with their life stands at 93 per cent, the highest level since the series started in the mid-1970s.

Data from the UN’s World Happiness Report tell the same story. It shows that happiness in the UK has increased significantly since 2015 and is running above levels seen before the financial crisis in 2008.

For someone who writes on economics or society, this seems puzzling. Economists see growth in GDP and incomes running well below pre-recession levels. Social commentators see cuts to public services, food banks, homelessness and the growth of insecure work. So why has measured happiness risen?

Part of the story is that the economy is actually working well for a lot of people. It is also because many of the non-economic factors which contribute to happiness have been quietly improving. We look at each in turn.

Having a job makes a big difference to happiness. It is partly money, but a sense of belonging, structure and purpose are important too. Anxiety and depression are four to ten times more prevalent among people who have been unemployed for more than 12 weeks than those in work. In the last ten years the UK has proved remarkably effective in creating new jobs and getting unemployed people into work. With the unemployment rate at just 3.9 per cent work is easier to find than at any time since the early 1970s.

The changing nature of work, with a shift from full-time jobs to more part-time, agency and temporary work and self-employment means that for some work has become more insecure. Yet it is also a world in which women find it far easier to enter the labour market, where self-employed people are happier than people in salaried employment, and where the great majority of people working in temporary or part-time roles do so out of choice, not because they cannot find a full-time job.

Agreed, incomes have grown only sluggishly in the last ten years. Yet across the income distribution people have more spending power now than they did in 2008. This helps explain why UK consumers spent 18 per cent more in real terms in 2018 than they did in 2007. The government has raised the minimum wage by 26 per cent in real terms since 2007, far faster than growth in average incomes. Income inequality has risen in many countries in recent years, but in the UK it is slightly lower than a decade ago.

Low interest rates have not been good for savers, but they have helped increase the value of the housing and equities held by households and have collapsed the cost of borrowing. The wealth of the average UK household has risen from just over £43,000 to about £70,000 since 2008. The burden of debt, relative to income, has fallen and debt servicing costs are at their lowest ever levels.

Income and jobs matter greatly to happiness, but they tell only part of the story. It is true that richer households tend to be happier, but the uplift from marginal increases in income decline once annual income rises much beyond about £25,000. (The lottery would probably create more happiness by spreading smaller wins across more people.)

The fact that people in Northern Ireland consistently exhibit higher levels of happiness than Londoners, or that people in Costa Rica, a middle-income country, report higher levels of happiness than in Japan, demonstrates that there is more to happiness than money. Other factors such as health, social support and trust matter too. A raft of less publicised social and welfare indicators for the UK suggest that our everyday lives are getting better.

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