Life satisfaction

Introduction

There is an emerging international consensus on the need to go beyond gross domestic product (GDP) per capita as a proxy measure of the wellbeing and progress of societies.¹¹⁰ The OECD is developing indicators of social and environmental outcomes that can be used to complement the GDP per capita measure. These include indicators of "subjective wellbeing" – an umbrella term for measures that tap people's own opinions and feelings about their lives.

Measures of subjective wellbeing have long been used in psychology where a number of different scales have been developed.¹¹¹ Political scientists and sociologists have used these scales in global surveys to show variations in life satisfaction or happiness between countries.¹¹² In the last decade, economists have become interested in the potential of measures of subjective wellbeing to provide insights into the determinants of wellbeing or "utility".¹¹³ Subjective wellbeing measures challenge the conventional economics approach of using income as a proxy for wellbeing because of the choices and opportunities it provides. Another widely accepted economics approach that has received global attention recently looks at people's capacity to meet their needs, using both objective and subjective measures.¹¹⁴

A great deal of research has been done to find out what determines life satisfaction or happiness – how it relates to demographic factors such as age and sex, or other aspects of people's lives such as health, education, work status and income. The research has established that subjective wellbeing measures themselves are sufficiently reliable and valid for wider use, despite some shortcomings.¹¹⁵ Self-reported life satisfaction measures can provide insights into what matters to people. However, because of the human tendency to adapt to circumstances, these measures are not a reliable reflection of people's actual conditions of life.¹¹⁶ To be meaningful for policy, measures of subjective wellbeing must go together with measures of objective conditions.

The social report has a number of subjective indicators, including satisfaction with work-life balance, satisfaction with leisure time, perceived discrimination, fear of crime, contact with family and friends, trust in others and loneliness. These measures complement the objective indicators in the report, such as life expectancy, obesity, adult literacy skills in English, market income per person, telephone and internet access in the home and assault mortality.

In this year's report, we include a new indicator of overall life satisfaction, using data from the 2008 New Zealand General Social Survey (NZGSS). It is a measure of people's perceived satisfaction with their lives overall. We make no claim that it sums outcomes across other domains. However, studies of subjective wellbeing have consistently found that the determinants of life satisfaction include good health, stable employment, income security and positive family and social relationships. These findings give credibility to the social report's domain framework.

The initial picture from this new indicator is consistent with findings elsewhere: reported life satisfaction is very high overall, is slightly lower among people in late middle age, and is much lower among unemployed people and those in sole parent families. A common finding from longitudinal studies is that losses (of jobs, income, health or partners) tend to have a greater impact on life satisfaction than gains and, although people tend to bounce back from adversity, some losses have long-lasting effects.