Are You Happy? Could Depend On What's In Your Wallet

Nov 13, 2019

Traditional economic data measures features like output and productivity, but typically ignores subjective qualities that make up the human experience. A study by University of Hawaii economists could help to change that by asking whether factors like poverty influence well-being.

One-in-ten Hawaii residents falls below the poverty line, which the federal government defines as an annual income of $30,000 for a family of four and $19,000 for an individual.

That works out to be more than 130,000 local residents, although the number is closer to 200,000 when adjusting for the local cost of living and using the Census Bureau’s Supplemental Poverty Measure. UH economists wanted to find out how poverty and other demographic factors impact an individual’s reported happiness.

Experts and policy makers regularly cite numbers like unemploymentproductivity and Gross Domestic Product to measure the strength of an economy. But they don’t always tell the whole story.

For example, quarterly GDP growth figures do not indicate whether workers are more fulfilled as a result of that additional output. Productivity, which measures how efficiently labor, land, and capital are used, doesn’t indicate whether a particular city is a pleasant place to live.

More fundamentally, can a qualitative concept like happiness even be measured? Several attempts have been made over recent decades. The Himalayan country Bhutan unveiled a Gross National Happiness index in the 1970s to function alongside traditional measures like GDP. The United Nations developed the Human Development Index to try and capture changes in human factors like life expectancy and education.

Inessa Love, a UH Manoa economics professor, and Philip Garboden, of the university's Department of Urban and Regional Planning, recently released a paper exploring the drivers of well-being for individuals and communities in Hawaii.

Love says there is not an agreed-to method for measuring well-being, but she and Garboden were particularly interested in how income levels and poverty affected happiness. Participants were asked to assess the overall quality of their lives, with zero being the worst possible and 10 being best imaginable scenario.

The topline results aren’t that surprising. Factors related to individual finances are the most significant.

“Out of the things we have measured, income levels has the largest impact. Being unemployed was also significantly lower well-being,” Love said.

The data indicates that those in the lowest income levels had the lowest levels of happiness. Love reports that reported happiness levels increase along with income through the middle-class range. The findings back up other research showing that additional income produces a smaller bump in happiness at the very high end of the income spectrum.

But there were also some surprises. Love said the unemployed reported being less happy than those with jobs, even if they were able to generate the same level of income without working. Love attributes that to the psychological value we attribute to work.

“Loss of purpose, loss of identity, loss of self-esteem, social connections. Those not working, are not happy. It’s because we associate so much about identity with what we do,” she said.

The psychological value of work isn’t often included in discussions of automation and the possible need for some kind of Universal Basic Income in the face of widespread unemployment.

But the Love-Garboden study does contain a potential remedy for the loss of well-being associated with gainful employment: education.

“The more education you have, the happier you are,” Love said. “It may not make you incredibly happy, like 9 or 10, but it will reduce chances of you being miserable.”

There is a practical component to this research, beyond the individual level. Knowing what aspects of the human experience most influence well-being can help governments and nonprofits more effectively target public assistance programs, getting the most impact per dollar spent.

Whether or not some economy-wide measure of well-being becomes widely used remains to be seen. Love says that traditional measurements like GDP do not capture the human elements of economic participation, leading concerns like happiness to be overlooked.

“In the last 50 years as a society, we got much richer but happiness didn't increase that much. So perhaps we are paying attention to the wrong thing.”

As an example, she cites the common aspiration for every American to own a single-family home, and the associated growth of distant suburbs and lengthy commutes.

According to Love, economic research shows that people under estimate the negative impact a long commute will have on their lives. That isn’t captured in traditional economic thinking, in which home ownership is lauded as the best means for accruing wealth. The reason long commutes negatively impact happiness is also difficult to reflect with conventional metrics.

“It’s kind of a waste of time that we could be spending with our families, pursuing our interests, or connecting with people we care about,” Love says.

So while suburbs and long commutes generate GDP growth in the form of new home sales and increased fuel consumption, there are real costs that are not currently being captured.

Hear the full interview with Professor Inessa Love:

Drivers of well-being in Hawaii: Quantifying individual and community impacts

This research was funded by a grant from the Hawaii Leadership Forum.