The increasing cost of happiness

Area of Science:

• Economics
• Psychology
• Sociology

Background:

• Economists and psychologists generally accept that income has diminishing marginal returns on happiness.
• The relationship between income and happiness is complex and may change over time.

Purpose of the Study:

• To estimate the relationship between income and subjective wellbeing over a 19-year period.
• To identify changes in the marginal return on income and assess if the change point has shifted over time.
• To test for temporal changes in the income-wellbeing relationship for both affective (happiness) and cognitive (life satisfaction) wellbeing.

Main Methods:

• Utilized household economic data from Australia spanning 2001 to 2019.
• Employed statistical methods to formally test for change points in the income-wellbeing relationship.
• Analyzed trends in affective wellbeing (happiness) and cognitive wellbeing (life satisfaction) in relation to income.

Main Results:

• The change point between affective wellbeing and income has increased significantly over the 19-year study period.
• This increase in the income threshold for happiness has outpaced inflation (cost of living).
• Evidence suggests a widening gap in happiness between high and low-income individuals.

Conclusions:

• The findings indicate that the income level at which additional income yields less happiness has risen faster than the cost of living.
• Income inequalities may be contributing to increasing inequities in happiness.
• These results have implications for public health and government policies aimed at monitoring and improving national wellbeing.