“Findings show that we have been over-estimating the positive wellbeing effects of income increases. Income losses have a much greater influence on wellbeing than equivalent income gains,” says Dr Christopher Boyce of the University of Stirling.
(Medical Xpress)—Living standards have risen significantly in the developed world over the past 50 years, so why aren't we happier than our grandparents?
A new University of Stirling study, which uses survey data from about 50 000 people in the UK and Germany, has the answer: the psychological benefits from income rises are wiped out by much smaller income losses.
The research, led by Dr Christopher Boyce of the Behavioural Science Centre at Stirling Management School, has significant implications for policymakers under pressure to establish economies that help maintain higher well-being.
Findings suggest that fiscal and monetary policy that focuses on economic stability, rather than high growth at the risk of instability, is more likely to enhance national happiness and wellbeing levels.
A strategy that runs the risk of small, temporary cuts to our spending, on the other hand, will probably lead to wider spread dissatisfaction than previously believed.
This is because people experience the pain of losing money more intensely than the joys of earning more.
The "Money, Well-being and Loss Aversion" research project based its conclusions on data gathered on about 20 000 people in the UK and 30 000 in Germany for up to nine years.
The study may help explain why bonus structures and remuneration schemes that are based on commissions can easily backfire, with staff morale taking a larger dip than expected in leaner times when there are lower – or no – bonuses.
The research also helps explain why there is risk aversion among investors: temporary falls in income have a much larger impact on our feeling of contentment than income gains of the same magnitude.
"Findings show that we have been over-estimating the positive wellbeing effects of income increases. Income losses have a much greater influence on wellbeing than equivalent income gains," says Dr Boyce.
"Over the past 50 years we have experienced long-term economic growth, but there has not been accompanying increases in our long-term wellbeing. We undertook this study to help understand why our happiness levels have not improved with rises in income," says the behavioural scientist.
Previous studies on money and wellbeing have examined income changes, but have not differentiated between the income changes that arose from losses, as opposed to gains.
"Both individuals and societal well-being may be best served by small and stable income increases even if such stability impairs long-term income growth," says Dr Boyce.
"Findings suggest that when we are thinking about trying to increase individuals' and societies' well-being it would be preferable to focus on economic stability as opposed to higher economic growth that risks greater volatility," he adds.
The research is published in the latest edition of leading academic journal Psychological Science and is available online from today.
Scientists analysed data gathered in the German Socio-Economic Panel Study from 2001 to 2009 and British Household Panel Study between 1998 and 2007.
Explore further: Increases in personal income important for happiness worldwide, new study says
More information: pss.sagepub.com/content/early/2013/10/14/0956797613496436.abstract
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“Findings show that we have been over-estimating the positive wellbeing effects of income increases. Income losses have a much greater influence on wellbeing than equivalent income gains,” says Dr Christopher Boyce of the University of Stirling.
(Medical Xpress)—Living standards have risen significantly in the developed world over the past 50 years, so why aren't we happier than our grandparents?
A new University of Stirling study, which uses survey data from about 50 000 people in the UK and Germany, has the answer: the psychological benefits from income rises are wiped out by much smaller income losses.
The research, led by Dr Christopher Boyce of the Behavioural Science Centre at Stirling Management School, has significant implications for policymakers under pressure to establish economies that help maintain higher well-being.
Findings suggest that fiscal and monetary policy that focuses on economic stability, rather than high growth at the risk of instability, is more likely to enhance national happiness and wellbeing levels.
A strategy that runs the risk of small, temporary cuts to our spending, on the other hand, will probably lead to wider spread dissatisfaction than previously believed.
This is because people experience the pain of losing money more intensely than the joys of earning more.
The "Money, Well-being and Loss Aversion" research project based its conclusions on data gathered on about 20 000 people in the UK and 30 000 in Germany for up to nine years.
The study may help explain why bonus structures and remuneration schemes that are based on commissions can easily backfire, with staff morale taking a larger dip than expected in leaner times when there are lower – or no – bonuses.
The research also helps explain why there is risk aversion among investors: temporary falls in income have a much larger impact on our feeling of contentment than income gains of the same magnitude.
"Findings show that we have been over-estimating the positive wellbeing effects of income increases. Income losses have a much greater influence on wellbeing than equivalent income gains," says Dr Boyce.
"Over the past 50 years we have experienced long-term economic growth, but there has not been accompanying increases in our long-term wellbeing. We undertook this study to help understand why our happiness levels have not improved with rises in income," says the behavioural scientist.
Previous studies on money and wellbeing have examined income changes, but have not differentiated between the income changes that arose from losses, as opposed to gains.
"Both individuals and societal well-being may be best served by small and stable income increases even if such stability impairs long-term income growth," says Dr Boyce.
"Findings suggest that when we are thinking about trying to increase individuals' and societies' well-being it would be preferable to focus on economic stability as opposed to higher economic growth that risks greater volatility," he adds.
The research is published in the latest edition of leading academic journal Psychological Science and is available online from today.
Scientists analysed data gathered in the German Socio-Economic Panel Study from 2001 to 2009 and British Household Panel Study between 1998 and 2007.
Explore further: Increases in personal income important for happiness worldwide, new study says
More information: pss.sagepub.com/content/early/2013/10/14/0956797613496436.abstract
Medical Xpress on facebook
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Personality change key to improving well-being
Mar 05, 2012
People's personalities can change considerably over time, say scientists, suggesting that leopards really can change their spots.
Increases in personal income important for happiness worldwide, new study says
Dec 03, 2012
For people living in both rich and poor countries, the average person's happiness is based on a combination of individual wealth, possessions and optimism, according to an analysis of new worldwide survey findings published ...
Study says money only makes you happy if it makes you richer than your neighbors
Mar 22, 2010
A study by researchers at the University of Warwick and Cardiff University has found that money only makes people happier if it improves their social rank. The researchers found that simply being highly paid wasn't enough ...
Low standards of child wellbeing linked to greater income inequality
Nov 16, 2007
Narrower income differences are more likely than economic growth to improve the wellbeing of children in rich countries, according to a study published on bmj.com.
Does migraine affect income or income affect migraine?
Aug 28, 2013
Studies show that migraine is more common among people with lower incomes. This relationship is examined in a study published in the August 28, 2013, online issue of Neurology, the medical journal of the American Academy of Neu ...
Recommended for you
Tip-of-the-tongue moments may be benign
7 hours ago
Despite the common fear that those annoying tip-of-the-tongue moments are signals of age-related memory decline, the two phenomena appear to be independent, according to findings published in Psychological Science, a jour ...
New article reveals why people with depression may struggle with parenthood
14 hours ago
An article by researchers at the University of Exeter has shed light on the link between depression and poor parenting. The article identifies the symptoms of depression that are likely to cause difficulties with parenting. ...
Veterans with Gulf War Illness show brain changes linked to memory deficits
16 hours ago
New research illuminates definitive brain alterations in troops with Gulf War Illness (GWI) thought to result from the exposure to neurotoxic chemicals, including sarin gas, during the first Persian Gulf War.
Variant of club drug 'K' might have new life as antidepressant
17 hours ago
(HealthDay)—The veterinary tranquilizer ketamine—perhaps better known as the illicit "club drug" Special K—may be reformulated for use as an antidepressant, and researchers report promising early findings.
Sisters serve as confidants, sources of support and mentors during intimate conversations
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User comments
© Medical Xpress 2011-2013, Phys.org network
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