Read a bedtime story - it's good for the economy

By Diane Coyle

Does getting richer make us any happier? It's a question many people would like to be in a position to answer, but for leading economies such as Britain it has become a serious matter. It seems that beyond a certain point, more money does nothing for people's well-being.

Does getting richer make us any happier? It's a question many people would like to be in a position to answer, but for leading economies such as Britain it has become a serious matter. It seems that beyond a certain point, more money does nothing for people's well-being.

What economists should really care about is the latter. So, if higher incomes are no longer enough to increase happiness, this poses an interesting new policy challenge. Why should people work harder to earn more if there is no psychological pay-off? How, then, are economists to make us happier?

One of the world's leading experts on the economics of happiness is Andrew Oswald, a professor at Warwick University. In findings presented at an ESRC (Economic and Social Research Council) conference in London last week, he noted that levels of job satisfaction for people in the UK are pretty high, around five or six on a scale of one to seven. Britain ranks 17th in the world as far as job satisfaction is concerned - not too different from our ranking in terms of GDP per capita. However, reported satisfaction has fallen significantly during the Nineties, especially for women; and stress levels, according to medical questionnaires, have climbed sharply. The surveys track the same representative sample of individuals during the Nineties. As Prof Oswald points out, even if we are pretty happy, that trend means that we have to worry for our children and grandchildren.

Of course, for most people who don't work in creative or professional employment, job satisfaction is not an end in itself, anyway. It is better to be happy than unhappy at work, but doing paid work is principally a means to an end, that end being increased well-being. In a fascinating essay in a new book published in honour of the economist Henry Neuberger, Prof Meghnad Desai of the London School of Economics argues that the focus of policy needs to be how people spend their time outside paid work in the production and consumption of "social goods". These are what he describes as "the bread and butter of living", such things as the reading of a bedtime story to a toddler or the sharing of a meal. Their essence is that they are produced and consumed jointly, and they are what generate well-being.

In this idea there is a straightforward link to policy. The state has most say over the lives of those citizens with the least money. And the focus of the welfare state has been on providing minimum monetary resources to furnish a restricted range of goods and services. The provision of financial support depends on the recipients' willingness to undertake paid work.

Nobody is going to get rich on benefit. Long-term unemployment tends to exclude people from mainstream social connections. Reducing the number of people - especially the young - who might never get a foot on the bottom rung of the jobs ladder and who are caught in the long-term unemployment trap is a good policy. But it is a good policy for social reasons as much as for economic ones. Given that the jobs available to New Dealers and lone parents are generally unappealing and poorly paid, the gains from entering paid work might easily be offset by the losses from having less time to engage in that social economy.

Prof Desai stresses he is not arguing against the importance of paid work, or underplaying the need to reduce the Government's benefits bill. But he concludes: "What it does say is that we should look carefully at the price we are paying for what we get from the welfare state and rethink our policies from the point of view of well-being."

Research by the National Statistics office underlines the point. It concludes that, valued at market rates for the job, adding in unpaid work in the home could double Britain's GDP. There is an economic cost to getting lone parents out of the home and into the workplace to weigh against the economic benefits of their earning an income and contributing to the market economy.

As for those in work who are becoming stressed and dissatisfied, Prof Oswald suggests the explanation might lie in the conflicting needs of producing in both the paid economy and the unpaid. Finding ways of resolving the conflict poses a challenge for economists. They have made us richer than our grandparents could have imagined. Can they make our grandchildren happier than we can dream of?

* 'Public Policy for the 21st Century: Social and Economic Essays in Memory of Henry Neuberger', ed Neil Fraser and John Hills, Policy Press, £17.99.

* d.coyle@independent.co.uk