Why Happiness Hasn't Increased

Despite vast increases in income per capita, longer holidays, better health care, and dramatic technological increases over the past fifty years, the overall happiness of people in many countries has not increased much, if at all. Table 1, below, shows that the percentages of people claiming to be very happy, pretty happy, and not too happy have barely changed at all from 1975 to 1996. Richard Layard points out several reasons as to why this is the case.

Income and Happiness

Income plays a vital role in determining the happiness of people. Studies show that 41% of people in the top income quarter consider themselves very happy, while only 26% in the bottom income quarter feel the same. As Table 1 indicates, the happiness of people in 1996 is essentially the same as in 1975. This is shown even though per capita income has steadily increased since over that time period. Table 2 shows that in the United States, France, Japan, and the United Kingdom, annual income per capita has grown at an average rate of 4.1% from 1950-1973 and at an average rate of 2.0% from 1974-2000.

Conventional wisdom would lead one to believe that such increases would only increase the happiness of society. The results, however, show otherwise. Unhappiness has actually increased based on studies of depression. Studies have some that there has been an increase in depression. 15% of people now experience some form of clinical depression by their mid-30s. Additional income seems only to help happiness in countries where the average per capita income is below $15,000 a year. In countries where it is above $15,000 a year, extra income has little effect.

Habit and Rivalry

From 1946-1986 the U.S. Gallup Poll asked people, "What is the smallest amount of money that a family of four needs to get along in this community?" The responses showed that as the actual average incomes rose, so did the amount people answered with. The amount that was given as a response grew in direct proportion to actual income. The two cause for the way in which this survey went involve the amount of income the people have experienced, habit, and the amount which others receive, rivalry.

Habituation can work for both bad and good things. People who are at a certain level of income become used to that amount and want to reach the next level. Once they reach the next level, the same process occurs and they continually want more. This leads to a decrease in happiness as people think they will always be happier if they can make a little more money.

Rivalry leads people to adjust their desired level of income based on what others have. There is a mentality that there is always someone doing better, so people strive to catch up to and outdo them. Studies have shown that if a person receives a 10% rise in income and so does everyone else, he will only experience 2/3 of the happiness he would have experienced if he was the only one to receive the increase.

This information is best shown in the results of the following two questions posed to Harvard graduate students:

1. Which of these two worlds would you prefer? (Prices are the same in each.)

A. You get $50K and others get half that.

B. You get 100k but others get more than double that.

2. Which of these two worlds would you prefer?

C. You get 2 weeks holiday and others get half that.

D. You get 4 weeks holiday but others get twice that.

The majority of respondants answered A to question 1 and D to question 2. The happiness of other people clearly affects the decision of the person in question 1 as they would be willing to accept half of the amount just so that others would get less. In question 2, however, the person does not seem to mind that others would be made better off. This shows that the theory of rivalry may only be valid when dealing with income amounts because the amount of vacation would certainly affect happiness.

Performance-related Pay

When performance and output can be easily monitored, performance-related pay seems the most efficient way of doing it. This, however, is not often easy to do and pay is commonly determined based on an employee's performance relative to other employees. Layard states, "This can motivate those who are likely to succeed, but can de-motivate those who are not, by giving constant reminders of the fact that they are not appreciated." This type of pay increases the presence of social comparison and reduces average employee morale even though it typically leads to higher average performance. Another side effect of performance-related pay is the increase stress it causes. Surveys by Eurobarometer indicate that stress in the work force has grown dramatically. Even though workers might be producing and earning more, the stress that is under them to perform and perform better than their co-workers cancels out any happiness they would receive from increased income.

Security

It has been shown over time that people's personal relationships are a large contributor to happiness. These relationships are deeply valued and happiness can be crushed when such a relationship goes bad. As a species, humans do not take rejection well. Unemployment has an immense negative effect on happiness because of this. Happiness studies show that the pain from rejection is far greater than the subsequent loss of income when a person become unemployed. Those that are working, are even more happier when they know their job is secure. Employment protection laws are heavily valued in Europe by workers. Although they may lead to lower productivity, they do not cause high unemployment. The main cause of high unemployment in parts of Italy, Spain, and Germany is due to wage rigidies. Employment protection is thus, not favored by companies who wish to easily rid themselves of inefficient workers, but it leads to a higher sense of happiness for workers. Security in the workplace has not increased as per capita income has over the last half-century. It has become less prevalent as technological increases eliminate humans jobs and more and more companies outsource production from the U.S. to places such as China and India.

Values

The final reason as to why happiness has not increased involves the values held by people. This involves whether or not people feel comfortable trusting others. When faced with the question, "Would you say that most people can be trusted," the amount of people responding "yes" has been on the decline. The number has fallen from 56% in 1959 to 31% in 1995 in the U.K. Similar results have been found in the U.S. In Europe a decline in moral values has been seen also. When asked whether people accept the practice of keeping an object one finds, 12% did in 1969 compared to 32% in 1990. These statistics show that the moral values of people are declining from what they used to be. People realize this has been occuring. When asked if people live "as good live - honest and moral - as they used to," only a quarter of people thought yes in 1998 compared with half in 1952. People now seem to have less of problem with pursuing their own interest and not caring about others than they used to. This hurts overall happiness as more and more people find themselves victims of other trying to get ahead.

Sources

Blanchard, Olivier. Macroeconomics. Pearson Prentice Hall. Upper Saddle River, NJ. 2006.

Layard, Richard. "The Secrets of Happiness." New Statesman, p. 25-28. 3 March 2003.