It’s official: money can buy you happiness

Emily Cadman

Sterling 20 pound banknotes pass through an automated currency counting machine in this arranged photograph inside a Travelex store, operated by Travelex Holdings Ltd., in London, U.K., on Friday, Sept. 12, 2014. The pound, already suffering its worst month in more than a year, has the potential to tumble 10 percent should the Scots vote for independence from the U.K., according to economists surveyed by Bloomberg. Photographer: Matthew Lloyd/Bloomberg©Bloomberg

Forget what your parents, your self-help guides or your religion may have told you: money can buy you happiness.

That, at least, is the conclusion from the number crunchers at the UK’s Office for National Statistics, who have combined data from surveys on household wealth and personal wellbeing.

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“Life satisfaction, sense of worth and happiness are higher, and anxiety less, as the level of household wealth increases,” the ONS said in a paper released on Friday.

Indeed, one very specific type of money has the strongest relationship with wellbeing: net financial wealth, which could be stocks and shares, savings in the banks or money under the mattress.

However, Generation Rent — young people struggling to get on the housing ladder — need not despair entirely. The ONS found that increasing property or personal pension wealth did not result in a measurable increase in wellbeing. Levels of household income — rather than assets already owned — were also far less strongly related.

Surprisingly, although physical assets such as antiques, yachts, swish cars or stamp collections might induce smugness, the ONS found they had no relation to levels of personal wellbeing, which may or may not disprove the theory that it is nicer to cry in a Ferrari than on a park bench.

The ONS asked individuals to rate their own wellbeing on a scale of 0 to 10, on questions such as how satisfied they were with life and were the things they did worthwhile? These responses were then crunched alongside household wealth and income, with the statistical model controlling for variables such as gender or ethnicity, to see what impact wealth or income had on an otherwise alike individual.

The ONS is confident the relationships it describes are statistically significant. For net financial wealth, for example, those in the bottom 20 per cent scored themselves on average 0.4 points lower than those in the middle 20 per cent.

The report is the latest entry into the debate about whether it is absolute or relative income and wealth that matter when it comes to improving wellbeing.

For instance, in influential papers, the economists Betsey Stevenson and Justin Wolfers tried to find evidence to support the idea that what matters for wellbeing is how you compare with those around you — in other words, keeping up with the Joneses. They failed.

After looking at multiple countries and numerous definitions of wellbeing and basic needs, they concluded: “If there is a satiation point [at which income and wellbeing are no longer related], we are yet to reach it”.

More importantly for policymakers, perhaps, they found that countries that enjoyed faster economic growth, on average also experienced greater growth in wellbeing.

In 2006, David Cameron, then opposition leader, urged statisticians to focus more alternative measures of the national quality of life. “Wellbeing cannot be measured by money or traded in markets,” he said.

Yet the new statistics, which resulted from his policy drive, suggest perhaps you can have a good go.

Diane Coyle, founder of Enlightenment Economics, is one economist who thinks statistics should be focused on more tangible outcomes.

“I don’t think we should be measuring happiness at all. It is not a ‘policy useful’ measure. The government doesn’t have levers that easily affect happiness, and should concentrate on the things that government can do,” she said, pointing to employment or spending on mental health.

In previous work by the ONS, good health, type of employment and personal relationships have proved to have the strongest links to high levels of self-reported wellbeing. At least the first two are something the government can do something about.

And if you don’t believe the ONS, you might agree with Ronald Reagan when he said: “Money can’t buy happiness, but it will certainly get you a better class of memories.”

Copyright The Financial Times Limited 2015