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Consumption 'better measure' of wellbeing

NZ Newswire logoNZ Newswire 15/09/2016
© Reuters

Consumption rather than income is a more accurate predictor of how satisfied people are, according to a study that looked at New Zealand data.

Co-author Dr Arthur Grimes says the study shows that the income measures commonly used by government are not necessarily the best for assessing poverty or subjective wellbeing.

"Higher levels of consumption and income are both associated with higher levels of wellbeing," he said.

"However, our study shows that consumption is more accurate than income for predicting how people feel about their lives."

A former chief economist and chair of the Reserve Bank of New Zealand, Dr Grimes is senior fellow at Motu Economic and Public Policy Research Trust.

He and co-author Thomas Carver used 2012 household-level data from 8500 New Zealanders for the study.

"Consumption adds considerable information to evaluations of wellbeing over and above merely focusing on income," Dr Grime said.

"If the level of consumption for vulnerable groups, such as Maori, people under 30 and those on the lowest incomes, is known, income tells us nothing further about their wellbeing."

The study also found that living in a poorer community is correlated with higher levels of life satisfaction.

"This result is consistent with the common finding that an individual's income relative to their neighbours is positively correlated with life satisfaction," Dr Grimes said.

"This means that both absolute and relative material wellbeing are seen to contribute to subjective wellbeing."

Other findings:

* Being unemployed, not having children and being single all negatively correlated with life satisfaction;

* Higher levels of self-assessed health and being female correlated with higher levels of life satisfaction.

* People in urban areas on average had lower levels of life satisfaction than those in rural regions.

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