Does getting richer make people happier? – Economics Observatory

Report on the Relationship Between Economic Growth, Wellbeing, and Sustainable Development Goals (SDGs)

This report analyzes the complex relationship between economic growth and subjective wellbeing, with a significant focus on its implications for achieving the Sustainable Development Goals (SDGs). The analysis, based on data from over 150 countries, re-examines the Easterlin paradox, which posits that while wealthier individuals are happier, national happiness does not necessarily increase with national wealth over time, particularly in high-income countries.

Key Findings on Income and Subjective Wellbeing

Individual Level Analysis and SDG 1 (No Poverty)

The research confirms a direct and positive correlation between individual household income and life satisfaction. A doubling of personal income is associated with a notable increase in reported wellbeing. This finding is consistent across both high- and low-income nations and underscores the fundamental importance of SDG 1 (No Poverty). Enhancing individual economic capacity is a critical component of improving human wellbeing.

National Level Analysis: A Dichotomy in Development Paths

The relationship between a nation’s average income (GDP per capita) and its population’s average happiness is more nuanced and varies significantly based on the country’s economic status.

• Low-Income Countries: In these nations, higher national income is strongly associated with greater average happiness, even after accounting for social variables. This highlights that pursuing SDG 8 (Decent Work and Economic Growth) is a vital and direct pathway to enhancing citizen wellbeing. Economic development in this context facilitates improvements in both material and social quality of life.
• High-Income Countries: For affluent nations, the direct correlation between higher GDP and higher average happiness diminishes significantly once social factors are considered. Economic growth over time does not show a significant corresponding increase in happiness. This suggests that for these countries, a narrow focus on GDP growth may be insufficient for advancing societal wellbeing.

The Role of Social Factors and Broader SDGs

The Primacy of SDG 3 (Good Health and Well-being) and Social Cohesion

In high-income countries, the positive effect of national income on happiness is largely mediated through social factors. The analysis indicates that variables such as healthy life expectancy and the strength of social support networks are the primary determinants of a population’s wellbeing. This finding places significant emphasis on:

1. SDG 3 (Good Health and Well-being): Public health is a more critical driver of national happiness than continued economic expansion in developed economies.
2. SDG 10 (Reduced Inequalities) and SDG 16 (Peace, Justice and Strong Institutions): Strong social support networks, which contribute to social cohesion and trust, are essential for wellbeing. Policies that foster these networks can have a more substantial impact on happiness than pure economic growth.

Policy Implications for Achieving the Sustainable Development Goals

The research provides clear, evidence-based policy guidance for nations at different stages of development, aligning with the integrated nature of the 2030 Agenda for Sustainable Development.

1. For Low- and Middle-Income Countries: Economic development remains a crucial lever for improving quality of life. Policies should prioritize SDG 8 (Decent Work and Economic Growth) and SDG 1 (No Poverty), as increases in GDP translate directly into greater wellbeing for their citizens.
2. For High-Income Countries: A strategic policy shift is recommended. To enhance societal wellbeing, governments should prioritize investments in social infrastructure over a singular focus on economic growth. This involves a greater emphasis on:
   • SDG 3 (Good Health and Well-being): Strengthening public health systems.
   • SDG 10 (Reduced Inequalities): Bolstering social safety nets and support networks.
   • SDG 16 (Peace, Justice and Strong Institutions): Promoting policies that build freedom and social trust.

In conclusion, while economic factors are foundational, achieving comprehensive and sustainable wellbeing requires a multifaceted approach. For affluent societies, progress on social and institutional SDGs is paramount for fostering happier populations.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 3: Good Health and Well-being

   • The article directly connects well-being and happiness to health factors. It states that for high-income countries, the link between national income and happiness is influenced by variables like “healthy life expectancy” and that policy-makers should prioritize improving “public health” to have a substantial impact on happiness.

2. SDG 8: Decent Work and Economic Growth

   • The entire article is centered on the relationship between economic growth (measured by GDP per capita and household income) and happiness. It analyzes whether “economic growth lead[s] to greater wellbeing,” concluding that it is a “crucial lever for enhancing people’s quality of life” in low-income countries but less so in high-income nations.

3. SDG 10: Reduced Inequalities

   • The article addresses inequality both within and among countries. It confirms that “within any given country, richer people do indeed report higher levels of subjective well-being,” highlighting income inequality’s impact on happiness. It also differentiates the policy implications for “low-income countries” versus “high-income countries,” addressing the different stages of development and needs among nations.

4. SDG 16: Peace, Justice and Strong Institutions

   • The article suggests that for high-income countries, policies that “promote freedom and trust” could have a more significant impact on happiness than pure economic growth. These elements are central to SDG 16, which aims to build effective, accountable, and inclusive institutions and promote peaceful societies.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 3: Good Health and Well-being

   • Target 3.4: By 2030, reduce by one third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being. The article’s core focus on “wellbeing” and “happiness” as a key policy outcome, and its mention of “public health” and “healthy life expectancy,” directly aligns with this target’s aim to promote well-being.

2. SDG 8: Decent Work and Economic Growth

   • Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries. The article explicitly discusses the importance of “economic growth” and “increases in GDP” for improving well-being, particularly for “low- and middle-income countries,” making this target highly relevant.

3. SDG 10: Reduced Inequalities

   • Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average. The article’s finding that “richer people report higher wellbeing on average than poorer people” underscores the importance of addressing income disparities to improve overall societal well-being, which is the principle behind this target.

4. SDG 16: Peace, Justice and Strong Institutions

   • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article’s recommendation for high-income countries to promote “trust” as a means to increase happiness implies the need for trustworthy and effective institutions, which is the focus of this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators for SDG 3 (Good Health and Well-being)

   • Subjective Well-being: The article’s primary measure is subjective well-being, evaluated on a 0-10 scale from the Gallup World Poll (“Cantril ladder”). This is a direct indicator for measuring the “well-being” component of Target 3.4.
   • Healthy Life Expectancy: This is explicitly mentioned as a key “social variable” that influences the relationship between income and happiness. It serves as an indicator of public health outcomes relevant to Target 3.4.

2. Indicators for SDG 8 (Decent Work and Economic Growth)

   • Annual growth rate of real GDP per capita (Indicator 8.1.1): The article extensively uses “GDP per capita” and “income growth” as the main measures of a country’s economic status and development. This directly corresponds to the official indicator for Target 8.1.
   • Household Income: The article analyzes the effect of “doubling an individual’s household income” on life satisfaction, using it as an indicator of economic well-being at the individual level.

3. Indicators for SDG 10 (Reduced Inequalities)

   • Disparities in well-being by income level: The analysis of how well-being scores differ between richer and poorer individuals within a country serves as an implied indicator of well-being inequality, which is relevant to the goal of Target 10.1.

4. Indicators for SDG 16 (Peace, Justice and Strong Institutions)

   • Levels of Trust: The article identifies “trust” as a key policy priority for improving happiness. Levels of social and institutional trust, often measured through surveys like the Gallup World Poll, can serve as an indicator for the effectiveness and accountability of institutions mentioned in Target 16.6.

4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article. In this table, list the Sustainable Development Goals (SDGs), their corresponding targets, and the specific indicators identified in the article.

Source: economicsobservatory.com