Money can buy happiness, but at diminishing returns.
The latest Household Economic Survey from Statistics New Zealand shows those with higher incomes are much more likely to say they are “satisfied” or “very satisfied” with their life, but these gains drop off as income increases.
This confirms a theory found in economic literature all over the world.
Economist Shamubeel Eaqub said that the data suggested that for those earning above $90,000 a year, the happiness gains tended to slow.
“There is no firm satiation point, but above that kind of income the gains tend to be relatively small.”
The survey shows those living in a household earning $34,100 or less were much less likely than those earning between $34,100 and $60,300 to rate themselves as “satisfied” or “very satisfied” with their lives, and much more likely to rate themselves “dissatisfied” or “very dissatisfied”.
The netrate of “satisfied” or “very satisfied” respondents increased by 11 per cent between the two groups, but only by 6 per cent between that group and the next one up – those in households earning between $60,300 and $89,800.
The net increase between that group and those bringing in between $89,800 and $135,000 was just 2 per cent.
The five groups each represent 20 per cent of the population, with the data coming from a weighted survey of 8000 households.
While the question specifically asked respondents to think about their lives on the whole, it came at the end of a detailed survey about the adequacy of their income, so it was likely that economic issues would be at the forefront of their minds.
“What we see in New Zealand and other places is that there is a basic minimum needed for a dignified life. Additional incomes above that help for savings, wealth accumulation, etc, but not necessarily for happiness or quality of life per se,” Eaqub said.
“The basic example is, if you earn $30,000 and your income rises by $1,000, the impact on happiness and satisfaction is much higher than if you had a $1,000 income increase when you earn $100,000.
Eaqub said surveys like this should focus the economic conversation around poverty and welfare, not simply growth.
“Much of our economic narrative is about economic growth and the idea that a rising tide lifts all. But the evidence is clear – there are many who are left behind.”
Economist Eric Crampton of the New Zealand Institute disagreed, arguing that continual growth is the best way to keep people happy.
“When people are able to look forwards, see that things have improved and are continuing to improve, people are happy.
“Low growth leads to higher unemployment, and if there is anything that leads to unhappiness it’s involuntary unemployment. We know that this destroys happiness.
“If you look at places like France that have fairly strong social safety nets and a lot more redistribution, you get a lot more of long term locked-in unemployment.
“Those guys are utterly miserable.”
This article was originally published on Stuff.co.nz. See the original here.
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