July 24, 2007

Happiness Is Increasing in Many Countries — But Why?

by Bruce Stokes
Bruce Stokes is international economics columnist for the National Journal

Personal contentment is on the rise in many countries around the world, especially in poorer societies in Latin America as well as in the emerging economies of Eastern Europe.

The new Pew Global Attitudes survey of more than 45,000 people in 46 countries and the Palestinian territories find that more people in more places have grown more satisfied with their lives in the past five years. In many countries, significantly more people say they are getting ahead in life, not falling behind. They also report that their country is advancing. And in many nations, these attitudes are broadly linked with improvements in per capita income over the last five years.

The relationship between rising incomes and increasing happiness is most evident in China, India, Latin America and Eastern Europe. The evidence is weaker in the poorer parts of Asia – Pakistan, Indonesia, Bangladesh – and most of Africa.

The Pew results suggest that people are generally happier in countries that have experienced stronger economic growth over the last five years, compared with the previous five years. In these economically expanding countries, citizens are likely to be particularly satisfied with their incomes and more likely to say they are making progress in their lives, conditions that lead to higher levels of overall satisfaction with life.

Individuals from poorer nations are also more satisfied with their lives in countries where concerns about income disparities between rich and poor are not growing, the survey found. In Africa, the world’s poorest region, people are markedly less satisfied with their lives and their incomes than people in other regions. These data suggest economic growth alone is less likely to produce happiness in poorer societies such as those in Africa where incomes remain low and large portions of the population still lack access to water, electricity and health care.

Pew’s findings on the link between rising incomes and growing satisfaction with life broadly track the conclusions reached by academics analyzing the results of other surveys, such as the Latinobarometer, conducted in Latin America, and the Afrobarometer, carried out in Africa. The Pew results also are generally consistent with other data developed in the new field of research known as the “economics of happiness”. This discipline examines self-reported individual well-being and compares those findings with data on income, inequality, health, education, job and family situation to better understand why some people are satisfied with their lives and others are not.

Rich and Happy

To live in rich countries is to be relatively happy, generally. Two-in-three (65%) Americans rank themselves relatively happy with their lives. Seven-in-ten (71%) Canadians are similarly satisfied. Europeans tend to be somewhat less happy. Just over half the French (57%) and not quite half the Germans (48%) say they are very satisfied with their lives. By comparison, only one-in-six Kenyans (16%) are happy.

These results reflect answers to a question Pew asked people all over the world. Respondents were shown a ten-step ladder of life. They were asked to imagine that the top of that ladder represents the best possible life for them and the bottom of the ladder represents the worst life. They were then asked to place themselves on the step of the ladder that most closely reflected their current situation. People also were asked where they stood on the ladder five years ago. It is this measure of satisfaction with life that Pew uses in its analysis of people’s happiness.

By Pew’s measure, however, happiness in rich countries has not improved much, if at all, over the last five years. Today, the same proportion of Americans, French and Germans say they are relatively happy with their lives as did in 2002. This plateauing in satisfaction with life seems closely tied with people’s feelings about their incomes. Americans and Canadians are only moderately happier now than they were five years ago with their earnings and Western Europeans are somewhat disappointed.

These Pew findings seem to confirm previous academic studies about the relationship between wealth and happiness in more affluent countries. Those surveys have shown, according to Carol Graham, a senior fellow at the Brookings Institution in Washington, that “on average, wealthier countries (as a group) happier than poor ones (as a group); happiness seems to rise with income up to a point, but not beyond it.”

Graham is referring to what researchers call the “Easterlin paradox,” named for Richard Easterlin, an economist at the University of Southern California. Easterlin concluded that gains in material well-being have little effect on satisfaction with life after a certain quality of life is achieved. According to Allen Parducci, another University of Southern California researcher, people’s expectations ratchet up over time, in line with improvements in their income. Thus a bigger paycheck ultimately leaves many people no happier.

This conclusion is not, however, universally shared by happiness researchers. Angus Deaton, of Princeton University, has concluded looking at different survey data that “the citizens of richer countries are on average more satisfied with their lives than the citizens of poorer countries [and] unlike the earlier studies, the effect of national income on national happiness is somewhat stronger in the rich countries than in the poor countries.”

The Pew data do not support Deaton’s assertion. Instead, the findings suggest a more nuanced relationship between income and satisfaction with life.

Moreover, the Pew surveys found sharp regional differences in happiness. Latin Americans report they are more satisfied with their lives than Western Europeans and Eastern Europeans, Asian or Africans, findings that are consistent with previous research. “We consistently find that Latin societies are happier than East Asian societies,” concludes work done by researchers at the Ed Diener Laboratory at the University of Illinois at Urbana-Champaign.

But comparing scores in self-reported life satisfaction can be deceptive. For example, an overwhelming majority of Americans (65%) seem satisfied with their lives in the Pew survey, as do an even larger proportion of Mexicans (76%). But per capita income in the United States is almost four times greater than that in Mexico. Similarly, per capita income in Nigeria is roughly half that in Bangladesh, but Nigerians are twice as likely to be very happy with their lives as Bangladeshis. Clearly, satisfaction with life is determined by more than income.

Personal Progress

People’s sense of their own personal progress is clearly linked to their satisfaction with their lives. To measure progress, Pew analysts computed the proportion of people who say they are on a higher step on the ladder now than they were five years ago.

Compared to surveys conducted in 2002, growing proportions of publics throughout Latin America report their lives are better now than they were five years ago. A growing proportion of Argentines, for example, now report they have made progress in the last half decade, and this perception correlates strongly with a dramatic improvement in their sense of satisfaction. In contrast, the percentage of Americans and western Europeans who think they have made progress on the ladder of life remained largely unchanged and, not surprisingly, there has been little improvement in their satisfaction with their lives. These results seem to confirm the Easterlin paradox.

In Africa, however, there appears to be little relationship between personal happiness and people’s sense of personal progress, an African disconnect from trends elsewhere in the world that plays out through much of the Pew data. Kenyans report a strong increase in their position on the ladder of life, yet the proportion of Kenyans who are very satisfied with their lives was essentially unchanged. There is a similar, if less dramatic, improvement in South Africans’ sense of their progress, but there has been no real change in how satisfied they are with their lives.

Relative Income Growth

One explanation for these differences may be relative income growth, defined as changes in per capita GDP in constant prices in national currencies compared with changes over the previous five years. If personal income is growing faster than in the past, perhaps overall satisfaction with life will have improved. Again, the results are mixed and sometimes contradictory.

Satisfaction with life improved sharply over the last five years in the six Latin American nations for which Pew has comparable data. Over this same period, these Latin American countries experienced strong improvements in income: the median growth rate in per capita income was 20% in Latin America, up from a mere 1% rate between 1997 and 2002. There was a similar improvement in life satisfaction in the six nations Pew surveyed in Eastern Europe, coupled with a 36% improvement in per capita income over the last five years, a substantial improvement in personal economic wellbeing compared with the previous five years.

Africa did not fare as well. Per capita income grew only 17% in the last five years. And while this was double the rate from 1997 to 2002, it was clearly not enough and self-reported happiness among Africans surveyed improved hardly at all.

Moreover, life satisfaction does not seem closely correlated to improvements in income in developing Asia. In Pakistan, for example, per capita income grew nearly five times faster over the last five years than during the previous five years, yet Pakistanis are only marginally happier. In Indonesia, personal incomes grew 22%, but life satisfaction declined overall. Complicating this analysis, self-reported satisfaction with personal income, as opposed to life as a whole, slightly improved in both these societies.

Clearly other factors such as religious and ethnic strife and concern about inequality may contribute to this disconnect between economic wellbeing and happiness. And despite the apparent correlation between income growth and happiness in Latin America and Eastern Europe, scholars warn against over interpreting the importance of income gains to well-being. Other research by Easterlin and others highlights the importance of non-income factors in determining people’s overall happiness, including health, family and stable employment and the importance of personality and temperament. (The Pew survey did not elicit information about personal health. However, other research has suggested that health is partially a product of income and that if money buys health it also buys happiness.)

Satisfaction with Family Life, Personal Life and Job

The Pew data shows a close correspondence between satisfaction with personal life and satisfaction with family life, both worldwide and in Africa and Western Europe. There were, however, wide divergences between median scores for satisfaction with personal life and with family life in Latin America and Asia; in both cases, peoples’ satisfaction with life went up while their contentment with family life went down over the last five years.

The Pew poll also suggests that overall happiness is linked to improvements in job satisfaction. In the six Latin American countries that Pew surveyed this year and for which there are comparable 2002 data, overall job satisfaction went up in five nations and satisfaction with life went up in all six. In the seven African countries Pew surveyed, happiness with work was up in three nations and down in four, possibly one reason overall satisfaction with life improved less than in Latin America.

Inequality

Differences in personal happiness may also be attributable to frustration with income inequality that may outweigh the positive benefits of economic growth and improvements in national wealth. These differences also serve as a cautionary reminder that per capita income – the size of a country’s economy divided by its population – is only a very rough indicator of personal economic wellbeing.

In Ghana, Kenya, Nigeria, South Africa – 4 of the 7 African countries where Pew has comparative data – per capita income grew at a faster rate in the last five years than in the preceding five years. There are no recent studies documenting income distribution changes in these countries. But in each of these nations Pew surveys also found an increase in the proportion of the population that expressed concern about the rich getting richer and the poor getting poorer. Nigerians, in particular, have experienced rapid income growth – a 26% rise in per capita income over the last five years – but their concern about the rich/poor gap has also increased the most among African countries surveyed. This concern may help explain why Nigerian satisfaction with personal income improved only modestly between 2002 and 2005, less than might have been expected given the overall growth in the Nigerian economy.

Similarly, in Pakistan and Indonesia – two of the poorest Asian countries Pew surveyed – concern about inequality has increased alongside strong economic growth. Again, distributional concerns may explain why satisfaction with income is up only slightly in both societies, despite sharp improvements in per capita income (a 24% increase in Pakistan and a 22% increase in Indonesia). This suggests that concern within a country about how one’s income stacks up against the incomes of others may be one reason that improvement in overall satisfaction with life is modest in Pakistan and that people have actually soured on life in Indonesia.

“Happiness research,” said Graham, “[has] allowed us to uncover significant amounts of public frustration among precisely those groups that should be satisfied or happy, according to our income base measures.”

Deprivation and Happiness

The Pew results confirm what intuition and what academic studies have found: poverty and unhappiness go hand-in-hand. Africans, who live in the world’s poorest region, are also the least satisfied with their lives.

“Being really poor really sucks,” said Jeffrey Sachs, director of the Earth Institute at Columbia University, at the Brookings Forum. “There is such a thing as absolute poverty, and absolute poverty is absolutely bad.”

The Pew results tend to confirm Sachs’ self-evident observation. Access to running water in the home is low in much of Africa and actually has decreased in Ghana, Ivory Coast, Kenya and South Africa. While access to electricity is better, it is still quite low in Kenya, Tanzania and Uganda. Little wonder, then, why only one out of every 14 (7%) Ugandans, one-in-ten (10%) Tanzanians and one-in-six (16%) Kenyans are happy with their lives.

The Pew data suggest that there may be little relationship, however, between improvements in satisfaction with life and improvements in the ability to pay for things such as food, health care and clothing. As might be expected, Africans’ recent growth in per capita income was accompanied by a significant decline in the percentage of people who say they cannot afford life’s necessities. But there seems to be no pass through in terms of improvement in satisfaction with life, which improved only marginally in Africa. In Latin America, far more modest improvements in the ability to pay for food, health care and clothing were associated with a much bigger jump in satisfaction with life.

Optimism

People in poor countries are often more optimistic than those in rich societies. The Pew survey finds that optimism – as defined by the difference between where people place themselves on the ladder of life today compared with where they think they will be in five years – is up in Africa and in Latin America over the last five years. By comparison, optimism is down in Western Europe, Canada and the United States. These findings broadly track with recent surveys in 11 African countries by the Afrobarometer that found unusually high levels of optimism among the poorest and most insecure people.

There also seems to be no correlation in the Pew data between people’s optimism and recent changes in their per capita income. So this positive outlook must be driven by other factors.

“We posit,” wrote Graham and Matthew Hoover in their piece “Optimism and Poverty in Africa: Adaptation or a Means to Survival?”, that “optimism may be a necessary or at least helpful trait for survival among the very poor. Alternatively, our results may reflect these individuals’ realistic assessment that conditions are so bad they can only improve.”

Rising Income Only One Sources of Happiness

In the end, the new Pew Global Attitudes survey suggests that in many parts of the developing world, happiness, especially satisfaction with income, seems to improve most in societies that experience rapid growth in per capita income. And the Pew data generally reaffirm findings from other public opinion surveys that frustration with inequality can outweigh the positive benefits of economic growth. Moreover, the data show that extreme poverty and unhappiness go hand-in-hand in much of Africa, as well as in other struggling societies.

Most important, the Pew data confirm the work of other researchers who find that the ingredients of happiness can help explain differences among poor countries. At the same time, the Pew survey underscores that income alone is not sufficient to explain why people in some societies are more satisfied with their lives than others.