Working makes us happy

You would think if you use a different economic measure aside from GNP (Gross National Product), you would expect the Philippines would rank up there in the Top 10. Apparently not (it ranked 103), largely due to the lack of job satisfaction due to either underemployment or worst no unemployment. It appears for most of us to be happy we need to have a decent job not only to keep us busy but also one to provide us sufficient income to meet our material needs. But not too much and not in a developed country like Australia as there is also a point where a having a job or a certain level of income does little to increase the level of happiness.

May 09, 2012

Happy or miserable?

Tired of using gross domestic product (GDP) as a way of ranking a country’s performance? There are other ways of ranking a country — competitiveness index, governance index, freedom index. Sadly, the Philippines does not rank well in terms of these indices either. But here comes a new list of ranking countries — Happiness. Based on Gallup polls taken from 2005-2011, countries are ranked in terms of happiness.

The ranking is shown in the World Happiness Report (WHR), edited by three noted economists: John Helliwell of the University of British Columbia, Richard Layard of the London School of Economics, and Jeffrey Sachs of the University of Columbia. Professor Sachs was in the Philippines recently on the occasion of the Asian Development Bank’s 45th annual meeting. He described the Philippine economy as “complicated.”

Using the traditional GDP growth rate, the Philippines ranked worst among Southeast Asian nations. Among ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam) economies, the country is expected to grow the slowest this year and in the next few years, according to the International Monetary Fund.

In terms of joblessness, how does the Philippines compare with its ASEAN-5 neighbors?

Poorly. It ranked first with 7.2% unemployment rate. That’s much higher than Indonesia’s 6.7% (Q32011), Vietnam’s 4.4% (2010), and Malaysia’s 3.0% (Q42011). Thailand has near full employment rate at 0.6% (Q32011).

In terms of success in its war against poverty, how does the Philippines compare with its ASEAN counterparts? Horrible. While our ASEAN-5 counterparts have long met the Millennium Development Goal (MDG) of halving poverty before 2015, poverty incidence in the Philippines has been flat, even slightly regressing, in the last decade.

The official statistics show that there has been little change in the country’s state of poverty in the last 10 years. In 2009, poverty incidence was 26.5%, slightly higher than the 26.4% in 2006 and 24.9% in 2003. But in order to meet its MDG of reducing poverty by half in 2015, the Philippines should reduce poverty incidence by 2 percentage points every year. That pace of improvement is simply not doable.

It’s fun in the Philippines, so it must rank high in happiness. Right? Wrong.

The brutal reality is that in terms of happiness, the Philippines ranked last among ASEAN-5 countries. It ranked 103rd while its ASEAN-5 neighbors ranked much higher: Malaysia 51st, Thailand 52nd, Vietnam 65th, and Indonesia 83rd, according to the World Happiness Report.

Singapore is the happiest country in Asia Pacific after New Zealand and Australia. Among the region’s most miserable countries in Asia Pacific are in South Asia: India 94th, Bangladesh 104th, Nepal 121st, Sri Lanka 130th and Afghanistan 131st. The Philippines’ ranking seems to suggest that it’s more akin to the South Asia group of countries than to ASEAN-5.

Denmark is the happiest country in the world. Finland, Norway, Netherlands, Canada, Switzerland, Sweden, New Zealand, Australia and Ireland complete the top 10. The United States ranks 11th.

A person’s happiness at a point in time is determined by “external” factors (income, work, community and governance and values and religion) and “personal” features (mental health, physical health, family experience, education, and gender and age).

For policy makers, the main issues are the environmental factors affecting happiness, since these are what can be changed. They also want to know how big an effect each factor has on happiness.

Work or lack of it is a major determinant of happiness. “Unemployment causes as much unhappiness as bereavement or separation. At work, job security and good relationships do more for job satisfaction than high pay and convenient hours,” according to the World Happiness Report.

“A key relationship comes through work. It provides not only a livelihood but a source of meaning — feeling needed and able to contribute. But not everyone can get work, nor if they can, is it always satisfying,” says the report.

It adds: “When people become unemployed they experience sharp falls in well-being and their well-being remains at this lower level until they are re-employed. The estimated effect is typically as large as the effect of bereavement or separation, and the unemployed share with these other experiences the characteristic of ceasing to be needed.”

“High unemployment also has spillover effects not only on the families of the unemployed but also on those in work, who feel less secure in their jobs.Thus, private sector employees are more affected than public sector employees, whose jobs are more secure. When we total up all the well-being effects of a rise in the unemployment rate, the loss to the rest of the population (which is a large number of people) is twice as large as the loss to the unemployed themselves.”

The quality of work is important, according to the WHR. The report argues that “…when in work, the quality of life at work is also crucial. The view that job quality consists of pay and hours of work has by now largely been superseded. In three waves of the International Social Survey Programme, workers rank eight different job characteristics, on a one-to-five scale from ‘Not at all important’ to ‘Very Important.’ The characteristics are: high income, flexible working hours, good opportunities for advancement, job security, interesting job, allows to work independently, allows to help other people, and useful to society. The results show that only around 20% of respondents in OECD countries say that having a high income is very important and the same figure applies to flexible hours and promotion opportunities. But around 60% say that job security is very important, with similar figures for interesting work and autonomy (50% and 30% respectively).”

Translation: high income does not necessarily guarantee happiness; job security, interesting assignment, and autonomy are more satisfying.

For the Philippines, where the number of self-employed (entrepreneurs, market vendors, farmers, pedicab workers, unpaid family workers, etc.) is quite high, the following findings might apply. ” When it comes to autonomy, some workers can completely control their quality of work, because they are self- employed. The self-employed do worse on many job dimensions, including income, hours of work and job security, but even so they often report higher levels of overall job satisfaction than do the employed, at least in OECD countries. A positive correlation is found in American and European data, and in data from Great Britain, Germany and Switzerland.This need not necessarily mean that the self-employed experience greater overall satisfaction with their lives, if they are sacrificing other dimensions of their lives to their job.”

Translation: the self-employed are not necessarily better off, especially if self-employment is not by choice.

Unemployment is a major form of market failure. It is also a significant source of unhappiness. These should provide policy makers a strong rationale for government intervention to create more decent jobs.

Benjamin Diokno is professor of Economics at the School of Economics, University of the Philippines(Diliman). He was formerly secretary of budget and management in the Estrada Cabinet and undersecretary for budget operations in the Aquino 1 administration.

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