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How Westminster's money could be why we're happy

Economy Watch

By Esmond Birnie, senior economist, Ulster University economic centre

The recently published draft Industrial Strategy for Northern Ireland (NI) makes the claim that people here have a sense of satisfaction with their lives which is the envy of people in London and the South East of England.

Recent official statistics shed some light on such claims. The situation is complicated and may not be as positive as it first appears.

For decades there has been criticism of one of the main measures which economists have used to measure economic progress - Gross Domestic Product. GDP includes things which are detrimental to wellbeing, such as petrol burnt up in traffic congestion, and also excludes things which are beneficial, such as leisure time.

The then Prime Minister David Cameron accepted that governments should be measuring "happiness" and attempting to tailor their policies accordingly. Hence, the annual measures of wellbeing which the Office for National Statistics present.

Whilst the main emphasis is on the UK as a whole, some of the indicators allow a comparison to be made between NI and the UK average. Hence, the headline figures of how people in NI appear to be relatively happier than their counterparts elsewhere. The table illustrates some of these results above. Such comparisons are interesting but it is less clear how we should interpret them. We could take them at face value. NI may have low levels of living standards, competitiveness and productivity, as well as relatively high unemployment and poverty, but it also has a relatively high level of wellbeing.

The recently-published draft Industrial Strategy made this point and indicated that policy should ensure that the apparently relatively strong position in terms of life satisfaction and wellbeing should be maintained.

An alternative view would be to challenge the implicit assumption which underpins the ONS analysis - are individuals always the best judge of their own wellbeing?

Possibly, people in NI think their wellbeing is better than it actually is (or, maybe, expectations are relatively low). Of the 22 indicators where NI could be compared to the UK average, NI was indicated as having better wellbeing in seven cases and lesser wellbeing in nine cases - the remaining six cases could not be determined (the statistical margins of error overlapped).

It may be significant that NI's relative position is stronger when one considers the more 'subjective' measures (such as, percentage feeling highly satisfied) as opposed to the more 'objective' ones (such as, the unemployment rate, environmental indicators or years of healthy life expectancy).

Certainly, some of the indicators may be surprising or challenge the conventional wisdom.

The ONS data indicate that the self-perception of mental wellbeing in NI is better than the UK average whereas the tendency has been to argue the reverse. The survey data says NI people feel less anxiety but medical prescription behaviour has suggested the reverse; research in 2014 implied NI has one of highest rates of anti-depressant use in the world.

There is also something of a conventional wisdom that NI people are relatively more focused on families and charitable action. But the ONS results indicate that people in NI were less likely to feel they had someone they could rely on in times of problems and NI people were less likely to commit time to voluntary activities.

A hard-headed response to the ONS "happiness" measures would be to say that it is not surprising that perceived well-being in NI is so high given that consumption in the region is being partly maintained by a considerable subvention of resources from outside - the fiscal transfer of about £10bn from the UK government.

Is that a sustainable approach to maintaining a high level of regional wellbeing? One of the ironies is that it is the very high GDP in the 'low quality of life' London region which part pays for the fiscal transfer to Northern Ireland and other regions.

For sure, and especially if one looks at the full range of ONS indicators rather than just a few headline figures about satisfaction with life, the data on well-being does not provide a "get out of jail free card" for economic policy making in NI. Notwithstanding the undoubted flaws in GDP measure, we still need to raise productivity in order to increase wages and living standards.

  • In next week's Economy Watch, we hear from Ulster Bank chief economist Richard Ramsey

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