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.
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Why did my comment not appear? Is this new system messed up?
I asked why the GDP graph shows the US around .6 (60), but the top graph shows US never even to 55 (.55)? This looks like a problem.
“The national mood has yet to hit a trough, and the post-election numbers don’t show any bounce. ”
I can tell you why I’m not bouncy in two acronyms:
MLK
JFK
I’m afraid for our president elect, and I’m afraid of what might happen in this country if my fears are realized. That and worrying about my job is plenty to keep me awake at night.
More than what the numbers represent – there is an elevated sense of despair due to the omnipresent discussions of economic downturn.
So when everyone frets you feel a bit left out(even if u are unaffected finacially) and so you also fret. And when one frets too much one tends to get into health problems.
I always end up picturing myself on rung 5 even though my circumstances change drastically. I guess it comes from being realistic yet not pessimistic. Things can get much better and much worse.
I’m so glad that this is starting to be tracked. Hopefully this paves the way for quality of life to become a quantitative factor in policy decisions, similar to the Bhutanese measuring Gross National Happiness.
It seems like a vast exaggeration to say that this decline in well-being is somehow similar to what we’d see if average incomes were cut in half. This is all about relative well-being– people don’t compare their well-being to some objective goodness, they compare it to what they’ve experienced. This is the type of reaction we’d expect from reading Tversky and Kahneman. Of course people are going to overreact to this news, but that doesn’t mean they are really as unhappy/have lost as much well-being as they would have if incomes were cut in half. It’s all relative to their starting point, and when the economy starts improving, even marginally, people will shoot up beyond what is rational as well.
I suspect part of the problem lies in anticipating the future. My job is good for another two years then who knows? At that point a woman approaching 50 may not be a hot commodity on the job market unless something is done about health care. I’m fine now but my estimate of future well-being waivers considerably. The job market has become extremely unstable — and that long predates the latest unemployment figures. I’d be curious to see the two figures used to arrive at the calculation broken out — who’s says they are struggling now; who’s worried about five years from now. Americans have been a nation of optimists — does that still hold now?
I fell off the ladder and broke my arm. Where does that put me?