TCS Daily

Happiness Is...

By Fredrik Segerfeldt - October 5, 2004 12:00 AM

The International Labor Organization (ILO) has just released a new report stating that Sweden is the best country in the world for workers. In the Swedish media, the report is presented under the headline: "Swedish workers happiest in the world." The UN labor body's report is said to be about economic security and happiness. But in fact is it a mishmash of social democratic clich├ęs.

The report states in the introduction that "it does not try to cover all aspects of economic security, or summarize all the work on related subjects by others... Rather, it highlights findings from the Programme over the past four years and gives particular attention to some issues that have been neglected or given relatively little attention."

Further on, one reads that "underlying the empirical work is a perspective that reflects the ILO's longstanding values and principles, trying to position them in a 21st century context, in which social and economic rights are placed at the centre of policy thinking and in which social solidarity and voice are regarded as essential."

It cannot be said more clearly. The report is an ideological product from a body with "social democracy" and a union perspective at the core of its activities. That a country which has been run by social democracy and trade unions for more than half a century should be ranked number-one is not surprising. The question, though, is what value the survey has, apart from the fact that social democratic Sweden is more social democratic than all other countries in the world.

Let's look into the matter by discussing (1) what happiness is, (2) what economic security is and (3) what the connection between the two is.

What is happiness?

Happiness is very difficult to measure. The ILO's sister organization, the UNDP, has objectively tried to measure a similar concept, human development. But human development and happiness are not the same thing. Human development is a (supposedly) objective concept whereas happiness by definition is a very subjective one.

The question is whether happiness as a concept is at all relevant when it comes to comparing policies between countries. To be fair, the ILO does not use "happiness" but the concept "life satisfaction", which I must admit, is much more relevant. (For reasons of simplicity, I suppose, the media rather refer to happiness). A more pertinent question, then, is what policy conclusions we can draw from how satisfied people are with their lives. That depends to a large extent on expectations. Life satisfaction then becomes dependent not on the absolute quality of a person's life, but a life result in relation to a life aspiration. Concepts that are subjective and relative are particularly unfit for comparison.

Let us illustrate with two persons, A and B. When A graduates, she expects to find a job that pays $50,000. B, who is much less ambitious, would be satisfied with a job worth $30,000. They both get jobs with a salary of $40,000. Despite the fact that their economic conditions are the same, A is unhappy (life dissatisfied) whereas B is happy (life satisfied).

What policy conclusions can we draw from this? Well, some of them are quite nasty. The first, which is not controversial at all, is that policy should make it possible for people to reach their aspirations. This is of course done by creating good conditions for as many jobs and career opportunities as possible.

But the other conclusion is more questionable. We simply need to see to it that people do not have very strong aspirations or expectations: "'A' should simply know her place and toe the line." These policies could be anything from restricting access to information to creating societies where striving for a better life is seen as something non-desirable or even dangerous. Such societies tend to turn totalitarian and to be associated with a minimum of human happiness. Furthermore, they tend to create miserable living conditions.

Surveys indicate that there is greater happiness in countries with modest income levels as compared to the richest countries in the world, giving evidence to the theoretical reasoning above about life satisfaction and aspirations. People with modest aims are more likely to reach them, and therefore more likely to be satisfied. Despite the fact that they are economically worse off than Swedes or Americans.

This is not to be seen as an argument against economic growth, however. Quality of life is not only about perceived life satisfaction. There are more neutral fact-based indices to use, such as longevity. And there is a very strong correlation between income levels and life expectancy, whether one measures rich or poor countries. Here, it seems like the entire UN system has gotten it wrong.

Last but not least, we must remember that human happiness is primarily a function of our relations with other people. Hopefully, the UN will not interfere with them.

What is economic security?

The ILO report does not define economic security. Rather it mentions a number of factors creating economic insecurity. It also presents as a fact that basic economic security is a human right. It can be questioned whether economic benefits that require both resources and action by someone else than the person to benefit from them really are human rights. (For example, would bad economic policies be a human rights violation, if the policies cause low economic growth and undermine the government's ability to provide even enough resources for people to survive?)

Leaving that issue aside, there are a number of questions to be asked to widen the perspective of the ILO report.

Are people more economically secure when they know the government will compensate them for lost income than when they know that there are jobs available so that they can provide for themselves?

The ILO report does not measure the share of the unemployed who have been so for a long time, or the chance of finding a new job when you lose it.

Are people economically more secure when the government takes their money away and saves it in public social safety nets than when they have the freedom to dispose of the majority of their income themselves?

Issues of ownership and empowerment are completely absent from the report. The fact that these questions are ignored shows that there are a number of perspectives and assumptions that are taken for granted as a foundation for the report. It is strongly ideological.

What is the connection between economic security and happiness?

"The most important determinant of national happiness is not income level - there is a positive association, but rising income seems to have little effect as wealthy countries grow wealthier. Rather, the key factor is the extent of income security, measured in terms of income protection and a low degree of income inequality," the ILO report states.

Here the ILO makes the same mistake as many anti-globalizers and as many other parts of the UN system tend to make. They give higher priority to relative than to absolute poverty, and they downplay economic growth, at least for countries that are already rich. That is not a neutral perspective, but an ideological assumption. And the basis for this assumption is not presented. It is just taken for granted.

If you think of it for a while, this reasoning can lead to most astonishing conclusions. Let us assume that Albania, or Benin for that matter, was to introduce a public unemployment insurance scheme, giving the unemployed grants corresponding to 100 percent of their lost wages. Would employees in these countries then be better off than American or Swedish workers (Swedish public unemployment insurance gives only 80 percent of lost income)? Of course, that is not the case. Thus, the reasoning is based not on a sustainable assumption, but on an ideological choice claiming that economic security guaranteed by the government is something desirable and even more important than economic growth.

We have to assume, though, that the ILO author does not mean that employees in Benin are better off than workers in the United States. Where, then, should we draw the line? How poor must a country be before the lack of resources gets more serious than the lack of government unemployment protection schemes? That issue is also ignored in the report.

There are good arguments supporting the suggestion that Swedish workers are the worst off in the entire rich world, since they carry the highest tax burden. This creates economic insecurity in the sense that people cannot provide food and housing for themselves and their family. Instead they are subject to the arbitrariness (or discretion?) of politicians and bureaucrats, who with simple decisions can change the economic conditions for a family quite abruptly.

It can also be seen as deeply humiliating for a full-time worker to have to go and see a government officer and beg for money to be able to buy food for his or her children, when the government already has taken away more than half of the person's income. And of course, the ILO report does not mention this perspective either.

One could also argue that social mobility is an important factor affecting people's happiness. Knowing that you, through your own efforts, are unable to leave your social class can create much more frustration than economic insecurity.

There are strong reasons for giving greater weight to exclusion, if you want to get a clear picture of people's happiness. In countries with high unemployment rates and large groups of society outside the labor market, it is not always relevant to look at just those with a job and on how "secure" they are and then draw conclusions of a country's happiness. In many countries, in particular the ones with strong trade unions, those already in the labor market appropriate themselves with privileges at the expense of those who are outside the labor market. This is often done by minimum wages and tough hire and fire laws. It is therefore more relevant, if we want to know to what extent a system as a whole creates happiness, to also include the unemployed.

The question, then, is how we are to react on a report of this nature. Well, I just get tired wondering where the UN system is going. Is it to be a cozy club for dictators combined with a think-tank of mainstream leftist gibberish? It seems to be going in that direction, since this is not the first report of this kind it publishes. And each time, the world organization makes itself less relevant. If we are lucky, that is. If we are unlucky, the UN will continue to affect national economic policies and make us all poorer, causing great harm to the world.

Fredrik Segerfeldt is a senior adviser with the Confederation of Swedish Enterprise.


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