The Economic Downturn Takes Its Toll on Well-Being
The usual economic data make it clear that the current downturn is causing financial pain. And now, thanks to an amazing new collection of data, we can also track the effects of our current recession on subjective well-being.
Since the start of this year, the good folks at Gallup have partnered with Healthways to create a new Well-Being Index. Every day, Gallup polls 1,000 Americans, asking a variety of questions about their subjectively experienced lives. These new data provide our first opportunity to track the national mood in such detail, presenting an amazing opportunity for researchers.
Let’s focus on responses to the ladder of life question:
Please imagine a ladder with steps numbered from zero at the bottom to ten at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?
The survey also asks about where you expect to stand on this ladder in five years. Answers to these two questions are combined to yield estimates of the proportion who are “thriving” (those on rungs seven or higher, who also expect to stand on rung eight or higher in five years), versus those who are “suffering” (people currently on rungs zero to four, who also expect to be in the same range in five years).
Those in between are termed “struggling.”
Whatever you call these categories, there was a sharp decline in well-being during the financial decline, which followed a slow downward drift in the first part of 2008 as the economy slowed. The national mood has yet to hit a trough, and the post-election numbers don’t show any bounce.
All told, the proportion of the U.S. population that is “thriving” has fallen from around 50 percent to around 35 percent. Is this a big decline? While there are caveats involved in contrasting time-series and cross-country assessments, the following chart provides some context.
A decline in well-being this big is roughly similar to the sort of decline you might see if average incomes declined by about a half.
That’s huge. Yep, this recession really is hurting.
Related research: Miles Kimball, Helen Levy, Fumio Ohtake, and Yoshiro Tsutsui on the unhappiness following Hurricane Katrina; Rafael Di Tella, Robert MacCulloch, and Andrew Oswald on happiness and the business cycle; and my own work on happiness and macroeconomic volatility.