Wealth and Income: Effect on SWB

There have been a number of researches that look into wealth as the main cause of a person’s well being. One of the studies particularly said: “People tend to be unhappy under adverse conditions such as poverty, war and isolation. ” (“Is Happiness Relative? ” 1). Ahuvia (2001), in his theory paper also discusses that people in rich countries are, on average, significantly higher in SWB than people in poor countries, which is consistent with a strong link between one’s overall level of consumption and one’s SWB.

(p. 23). This is the reason why most of the people who are happy come from nations that are wealthy. The “loophole” in these types of studies, however, is the fact that when it came to comparing individuals’ SWB (of the same country), income has little relationship if the basic needs have already been met. It even shows that the increase in SWB among the poor is higher once they gain wealth, compared to the rich who don’t really have that much of an increase in their SWB levels if additional wealth is gained.

Ever wondered why a lot of people are workaholics and can’t stand not having jobs? The want of money and material gains are the answers to the question. As you can see, the theory of unemployment as a determinant of a person’s subjective well being is very much connected to the wealth theory of SWB. I will discuss the determinant unemployment later on. There are also researches on wealth and well being that classifies income into two: absolute income (e. g. how much income a person is earning every month) and subjective income, which is income according to a person’s perception.

In the research made by Ferrer (2002 p. 11), it is stated that the general satisfaction with life (SWB) depends on whether individuals perceive their income as adequate to satisfy their needs, where needs include not only food and shelter but also higher needs such as social acceptance or self-esteem (Maslow, 1970). It is said that there is higher correlation between SWB and subjective income when compared to the comparison between SWB and absolute income. One’s past income is also taken into consideration.

People tend to compare their previous income with their present income, and that also makes subjective income as higher in correlation compared to absolute income. I agree with the said finding as it is normal to switch jobs if the new job you would be transferring to would give you higher pay/greater benefits. Why would you transfer to another job with a lower income than your previous job? Another example would be: a student who got an A in one subject, (let’s say Statistics). If in the next grading period, that person gets a B+, then the person would definitely feel bad.

Now another student who keeps on getting Cs on the same subject would feel positive when that person gets a B+. As you can see in these examples which I provided, the life satisfaction scores in terms of income/wealth is subjective. Unemployment: Effect on SWB Having determined the role that income/wealth plays in SWB, the next topic to look into would be unemployment since this is the state when a person is not able to earn money. Is there a significant effect in SWB if the individual is unemployed? To answer this question, let us take a look at a few researches on the topic.

Lalive and Stutzer’s Study Lalive and Stutzer (2001) stated in their research that “Unemployed people are significantly less happy than employed people and their reduction in life satisfaction is the larger, the stronger the norm is. ” (p. 2) We all know that there is a social norm to work. Note: social norm defined as the belief shared in society on how one ought to behave, which enforces a specific type of behavior related to that norm. The stronger that norm is, then, the more unsatisfied an unemployed person is, meaning, that this person’s SWB is low as compared to that of the employed individual.

Lalive and Stutzer’s study pertained to unemployment based on the social norm and a person’s SWB. The first step in the study was to determine and measure the social norm. The social norm of the study was based on the survey on Switzerland’s “Unemployment Referendum,” wherein unemployed individuals seeking for jobs, have unemployment benefits provided that they have contributed at least 6 months in the unemployment insurance in the past 2 years prior to them being unemployed, and the survey intended to determine what the social norm was during the time of the referendum.