The relationship between money and happiness is complex. Photo / Getty Images
The relationship between money and happiness is one of the most controversial and debated topics in economics.
This is according to Auckland University economics Professor Robert MacCulloch, who tells The Front Page podcast that there’s little consensus on this issue.
His comments come shortly after an analysis of Purdue University data by Australian company S Money suggested that you need an eye-watering annual household income of $193,727 to be happy in Aotearoa.
MacCulloch says headline findings like these send the wrong message because they don’t afford sufficient weight to the many counter-arguments.
He points to the work of economist Richard Easterlin, showing that, over the past 50 years, countries such as the United States have increased their material wealth enormously but Americans have not become any happier.
“Easterlin questions whether economic growth actually brings great happiness,” says MacCulloch.
“The paradox is that if you look within a country, richer people seem to be happier than poorer people. And Easterlin believes it’s a relative income effect: if you’re rich, you feel you’re doing relatively well compared with the poor.”
The other problem underpinning all this is that happiness is an incredibly vague concept.
“There’s still no agreement on the best measure,” says MacCulloch, explaining that different surveys ask different questions and that some researchers believe that surveys aren’t the best way to gather this information, given that people often give misleading answers.
Modern methods even employ the use of MRI scans to try to gather an objective measure of happiness in the brain.
The average household wage in Aotearoa currently sits at around $117,000, almost $80,000 shy of the amount necessary for happiness, according to the latest study.
This would lead one to believe that many New Zealanders are quite unhappy, but this is not borne out in other data.
“Although people are complaining quite a bit in this country at the moment, we rank in the top 10 in the world in terms of self-reports of happiness,” MacCulloch says.
“We rank higher than the United States and most countries in Europe. So, most Kiwis are actually reporting themselves as pretty happy with their lives. I don’t think the idea you need $190,000 to be happy is correct. It’s not true.”
This doesn’t change the fact that New Zealand has a low-wage economy and that its productivity levels are low compared with the rest of the OECD.
So what can we do to rectify those issues? And are any of our political parties offering anything practicable to nudge the dial on either of those problems?
Listen to the full episode of The Front Page podcast for a discussion on the uneasy relationship between money and contentment.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
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