Happiness should be at the core of our inner pursuits, and common-sense guides us towards this objective, both by staying healthy and creating financial security. However, nobody talks about what’s more important? Money or health? Would you rather be rich and fat or poor and healthy? And is it better to be cash-flow rich but asset poor or cash-flow poor and asset rich? The OECD global data for 2015 shows all of the above as important connections, however income seems to be the greatest contributor to happiness, at least statistically.

Happiness Economics

We spend so much time analysing markets and global data, yet we rarely take a moment to reflect on the purpose of our laborious activities. It has been famously said that every human is seeking happiness and purpose, with each entitled to their own opinion on what matters most.

With happiness at the forefront of our minds, it is interesting to see a growing field of study on “happiness economics”, which is primarily designed to answer the world’s hardest and longest running questions: What makes us happy? Does additional money make us happier? And is health or money more important to our happiness?

The OECD is at the forefront of this research and their data is freely available to download via their website http://stats.oecd.org/. Naturally, we took advantage of this opportunity and ran similar tests to those that we sequence on monetary matters. What we found is largely common-sense, although fascinating and worth reminding ourselves as we venture through our financial well-being and health-conscious lives.

Happiness and money

What seems to matter:

  1. Money – according to the OECD global data, there is a 0.66 correlation between income and happiness on average. There is also a 0.43 correlation between a person’s total wealth and their happiness. This link between income and happiness is one of the strongest of all (at least statistically speaking); marginally surpassing other factors such as health, education and social networking. An interesting comparison involves the difference between the 20% highest income earners versus the 20% lowest income earners in the OECD countries. The analysis consistently showed that money was important, although its importance seems to diminish the wealthier you get. For example, the correlation between personal earnings and happiness is strongest for low and middle income earners at 0.65 and 0.66 respectively than for high income earners at 0.32.
  1. Health – around the world there is a 0.64 correlation between a person’s self-reported health and their happiness. This is also a very strong factor and tends to increase as income levels grow. Interestingly, the “self-reported” health has a higher correlation to happiness than a person’s actual health or life expectancy (which also has a reasonable correlation of 0.38). We found it noteworthy that Australia’s self-reported health is among the world’s highest at 85%, despite us having among the world’s highest obesity rates.
  1. Social Networks – around the world there is a 0.51 correlation between the strength of a person’s social network and their happiness. Consistent with other data, it showed that people with higher incomes tend to have marginally stronger social networks.
  1. Education –the link between education and happiness is not as strong as many initially assume. Officially, there is a 0.17 correlation between education and happiness, which shows a weak but positive connection. Interestingly, the link between education and happiness also diminishes as personal incomes increase.
  1. Long-term unemployment – there is a high negative correlation of -0.56 between the long-term unemployment rate and average happiness level. Expectedly, a higher unemployment rate is linked to those with lower education standards and lower wealth.

 

Note on Money and Happiness: None of the above is likely to make you change your day job, although it is nice to provide clarity on what matters most to the average human. In Australia the wealth divide clearly still exists, although this pleasingly seems to have a relatively small impact on one’s ability to find happiness. Maybe it is not all about money after all.

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