Happiness is U-shaped

Don't believe all you read suggesting that quality of life in the UK is rotten

The headline on a recent study published by uSwitch.com was "UK enjoys highest net income in Europe, but quality of life is poorest". The research compared ten countries by a range of dimensions and ranked them in the following order: France, Spain, Denmark, Netherlands, Germany, Poland, Italy, Sweden, Ireland and finally the United Kingdom.

The UK scored badly on life expectancy, number of holidays and prices of various goods. And, of course, we have very little sunshine. Britain, according to this study, is the worst place to live in Europe. What nonsense! This is one of the most misleading measures I have ever seen.

Most people don't have the time or the interest to look at the details of how such measures are created, but in fact the devil is in the detail. The uSwitch overall index takes 17 measures, including the price of cigarettes, the price of diesel, the amount spent on health and education, retirement age and average hours worked, and weights them all equally. So it turns out that differences in the price of a packet of cigarettes across countries are weighted the same as income per head or life expectancy. The index includes the prices of seven goods - such as fuel, food, electricity, alcohol and cigarettes - that are expensive because of the depreciation of the pound against the euro. They shouldn't be in any index. And even David Cameron can't do much about the lack of sunshine.

Matching patterns

The results are incredibly sensitive to which measures you select and what weights you use. Vary either of those a little and the rankings change markedly. I kid you not. But that set me thinking about some alternatives.

For simplicity, I decided to restrict my analysis to four countries - France, Spain, Denmark (which were ranked first, second and third by uSwitch.com) and the UK. It turns out that the UK does a lot better than France and Spain, surprise, surprise, judging by my alternatives.

I started with unemployment rates. As can be seen in the table (above right), nearly one in five of the Spanish workforce is unemployed, compared with under one in 12 in the UK. Unemployment rates are also higher in France. In the second row of the table I present youth unemployment rates, which are also much higher in Spain and France than they are in the UK, if not in Denmark.

The Institute for the Study of Labour (IZA) in Bonn, at a ceremony that I attended in Washington, DC late last month, awarded its prestigious prize in labour economics to the father figure of the economics of happiness, Dick Easterlin. The prize was richly deserved. Easterlin was the first economist to show the importance of self-reported happiness data in measuring a nation's well-being. The UK ranks much better when we look at these kinds of data.

In the bottom row of the table I report data on life satisfaction taken from the 2009 Eurobarometer survey, conducted by the European Union early this year in every EU country. Approximately 1,000 respondents in each country were asked: "On the whole, are you very satisfied, fairly satisfied, not very satisfied or not at all satisfied with the life you lead?" I coded the scores as 4 if very satisfied, 3 if fairly satisfied and so on, and took the averages by country. The averages for each country are presented in the bottom row.

It seems that we Brits are happier than the French and the Spanish, although we aren't as satisfied with our lives as the Danes. Interestingly, measures of happiness have fallen quite a lot recently in Spain and France as levels of unemployment have increased. But the surveys haven't moved much at all in Denmark or the UK.

It turns out that there really is something in this happiness data. People's reports of their happiness are validated by assessments of a particular individual's happiness by spouses, friends and family members. Happiness is also correlated with objective measures, including pulse rate, the risk of coronary heart disease, as well as electroencephalogram tests of prefrontal brain activity. It generally doesn't matter much how the question is asked or which survey is used - the patterns in the data are broadly similar.

So what characteristics do happy people have? Happiness turns out to be higher among women, married people, the highly educated, the religious, those politically on the right wing, the healthy, the non-obese, those with high income, non-smokers, the self-employed, the sexually active, those with one sex partner and those without children. Happiness is U-shaped in age, with people feeling at their happiest when young or old. These are all very consistent patterns in the data across countries and time periods.

Bad for one, bad for all

There is adaptation. Good and bad life events such as divorce wear off, at least partially, as people get used to them. If someone becomes unemployed, his or her individual happiness score drops considerably. But an increase in the unemployment rate lowers the happiness of everyone else as well. For well-being, it would be good to have some inflation, but bad to have any more unemployment right now.

Despite increases in gross domestic product, it turns out that happiness levels haven't moved much over time. Why not? It turns out that relative things seem to matter much more than most people think. In experiments, people care about how they are treated compared to those who are like them, and in the laboratory will even pay to hurt others to restore what they see as fairness.

In large statistical studies, reported well-being depends on a person's wage relative to an average or "comparison" wage. The outcry over bankers' bonuses suggests that people care a great deal about fairness.

Happiness data is a very reliable indicator of the quality of life across countries. Think of it as a measure of gross domestic happiness (GDH). It reflects movements in unemployment, inflation, output, income and much more.

So don't believe all you read suggesting that quality of life in the UK is rotten. We are happier than the French and the Spanish, so there! Now the Danes are another matter. More on this happiness stuff in later columns.

David Blanchflower is professor of economics at Dartmouth College, New Hampshire, and at the University of Stirling

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