Economics of happiness suggests the pursuit of money might be a big mistake – John McLaren

It’s late January in Scotland, are you happy? Chances are, not that much.

According to the latest Office for National Statistics (ONS) survey data, Scotland has the lowest level of happiness amongst all the UK regions and nations, just below London. The happiest parts of the UK are Northern Ireland followed by the East of England.

The ONS warns against comparing happiness readings at the local authority level, due to small sample size issues potentially distorting the results. Casting that caution aside for a moment shows that the happiest places in the UK are Torridge in Devon, Pendle in Lancashire and Lichfield in Staffordshire, while the lowest scores are seen in Colchester, then Redditch and Norwich. In Scotland, the Western Isles and the Highlands ride highest while Glasgow and Edinburgh are the gloomiest.

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Fair enough, but what does all this really tell us and of what interest might it be to policymakers? For a start, rich doesn’t equate to happy. London is the richest region but close to the unhappiest and well behind relatively poor areas like the North East of England. Equally, in Scotland, Edinburgh is wealthy but its residents are, relatively, unhappy.

There are, of course, a blizzard of warnings that apply when using these figures. First is the sample size issue already alluded to, especially in small population areas like the island councils. Second is the demographic make-up impact on local authorities. For example, retirees tend to be happier and may be more concentrated in less urban areas. However, London aside, this impact may largely wash out once you scale up to regional level.

Third, there may be considerable variation within a region. Hence, while the East has the highest regional ranking within England, it also contains two of the three lowest-ranking local authorities. Fourth, London is, uniquely, a wholly urban area and so can be expected to have a lower score than an urban-rural mix region.

Policywise, the big question is do such survey results have implications for where government money needs to be spent? Should we eschew the closing of the gap between GDP per head in different geographical areas as being too narrow a target and aim instead to reduce the gap in happiness or life satisfaction? That would certainly seem to chime with the Scottish Government’s preference to improve well-being over wealth.

These findings take us into areas like the ‘Levelling Up’ agenda. Based on happiness statistics, the ‘Greater South East of England vs the rest of the UK’ inequality issue becomes more nuanced. The survey data suggests more needs to be done to help London be a less unhappy place.

Happiness appears to be less about money than some people might think (Picture: John Phillips/Getty Images)

Meanwhile, what exactly is Scotland’s beef? It is relatively wealthy within the UK. It is relatively rural and has lower poverty levels than the UK as a whole. So why the downheartedness, relatively speaking? In particular, what needs to be done in wealthy Edinburgh to make people happier?

Going back to the ONS survey data, the happiness results may not seem that different across regions – Northern Ireland is top with an average score of 7.61, while Scotland is last with a score of 7.36, just below London on 7.37. However, these small differences in scores can equate to large differences in life experience. For example, analysis suggests that losing your job equates to a fall of around 0.4 points in happiness. So a differential of 0.25 between best and worst can be seen as highly significant. And across local authorities that overall differential rises to 1.4 points.

Further analysis of the ONS data points to areas where public policy might impact on the scores. While the most recent work has concentrated on the impact of factors on life satisfaction survey scores, these tend to be closely related to associated happiness scores, so can be used as a fair proxy.

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The research finds that self-reported health has a larger effect on life satisfaction than any other characteristic or circumstance considered. Being unemployed or economically inactive also has a significant negative impact.

Housing tenure has a strong association with life satisfaction, with those living in social rented housing least satisfied. However, this apparent correlation may be misleading and instead relate to the high proportion of people in such housing being either single, in bad health or not employed, as opposed to the state of the housing itself being a contributing factor.

Higher household income has a positive impact on life satisfaction but only if it is between £24,000 and £44,000. Within overall household spending, a higher share spent on transport, for those of working age, is associated with lower life satisfaction. In other words, commuting is a real pain, as if we didn’t already know.

We might infer from all of this that government spending on health is vital to happiness and well-being, which is a worry given the present circumstances. We might also infer that improving the quality of, and subsidy for, public transport might also prove beneficial. More research work is probably needed but perhaps the negative impact of commuting on the happiness of people living in busy urban areas like London and Edinburgh needs to be taken more seriously. Again, this is a worry given the state of some public transport systems post-pandemic and given the impact of recent labour disputes.

As the economist and behavioural science guru, Andrew Oswald, recently pointed out in a letter to the Financial Times, these statistical facts “provide a complicated challenge to those who wish to argue for conventional versions of the UK’s levelling up agenda… they tell us that the pursuit of money and material status in our lives might be a foundational mistake – for ourselves and for society”.

Plenty to chew on then, especially if you live in Colchester.

John McLaren is a political economist who has worked in the Treasury, the Scottish Office and for a variety of economic think tanks

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