Another research on unemployment discussed this: The marginal impact of each life factor is assessed by reading off its coefficient in the well-being regression equation. (Clark and Oswald, 2002,p. 4). In this study, a regression equation is used to calculate the value of different events in a person’s life (e. g. marriage, unemployment, divorce etc. ) through the use of SWB scores. The expected outcome is to know which among the life events have the utmost effect on a person’s subjective well being. The said assessment is done by the equation: estimated coefficient on income divided by the estimated coefficient on the studied life event.
The way to determine the monetary valuation of events is through an equation using subjective well-being as the dependent variable. Other parts of the equation would be the data on: measure of income, “dummy variables” e. g. life events (employed, married or single), and other influences like day-of-the-week effects, variables from childhood (e. g. comes from a broken family, and so on). These equation components are used to determine the level of pleasantness and unpleasantness of the said events in a person’s life. One particular example in the said study focused on people being suddenly unemployed.
In this case, the income of the employed individual who became unemployed is important to know in order for the researchers to know how much income is required to compensate the unemployed individual and restore his/her SWB to the level it was during that individual’s employment. In other words, the method revealed that unemployment does have a negative effect on a person’s SWB, and at the same time causes ill-health. It is important to note however, that getting income back is not the way to return the individual’s happiness levels to normal because the negative effect of unemployment on subjective well being is more of a psychological one.
This is where social comparison comes in. The SWB of unemployed employees are not affected only by social norms, but also by social comparison wherein the quality of life of the people surrounding them affects the perception of their own well being. I believe that social comparison affects unemployment which in turn affects the person’s SWB because an unemployed person, given the fact that he/she may feel useless, would feel even worse if the people around him/her are employed or have great jobs. Let’s take a look at the definition of social comparison.
Easterlin (2003), in discussion paper entitled “Building a Better Theory of Well Being states that: “The utility created by one’s having a given amount of a good depends partly on the amount of that good that others have. ” (p. 22). For me, this definition is true since it’s always been innate in people to have this attitude of comparing themselves with other people, and most of the time, it is but natural to feel that you would want to be someone who is more successful or would like to get the same (if not exceed) the quality of life that your neighbors have.
(Remember one of the rules in the Ten Commandments: Though shall not covet thy neighbor’s goods). This dependency on other people’s wealth/quality of life does have an effect on the individual’s answer to the question of how happy they are with their lives. Luttmer’s Study Luttmer’s (2005) research on the social comparison theory as a factor of SWB shows investigation on whether people feel depressed or unhappy when other people are doing better than them. What was the methodology used in the study? Luttmer recounts:
“I use panel data on individuals’ self-reported happiness, other measures of well-being and other characteristics from the 1987-88 and the 1992-94 waves of the National Survey of Families and Households (NSFH). I match this data to information on local earnings, where localities are so-called Public Use Microdata Areas (“PUMAs”), which have about 150,000 inhabitants on average. Average annual earnings in each PUMA are estimated by applying national earnings by industry, occupation and year from the Current Population Survey to the industry and occupation mix of that PUMA from the 1990 Census five percent Public Use Micro Sample.
I find that higher PUMA-level earnings are associated with lower levels of happiness, controlling for a host of individual characteristics including income. (p. 2) The results of the study show that once an individual compares higher levels of neighbors’ income with their own income, this tend to result to lower levels of happiness or SWB. It was also seen that when the neighbor’s earnings increased in the same way as the individual’s earnings decreased, there was a decrease in the levels of satisfaction.