Income inequality is having a significant impact on factors like health, human and social capital which are keys to the level of happiness regardless of income growth
Why should we grow rich if we are not getting happier? Well that is something actually we should ask but we don’t. We care to be rich than to be happy, believing that being rich might give us happiness later. While we fail to understand the moral philosophy that “money can never buy happiness”, we also over-shadow the economic philosophy which also reflects the same. We do presume that better income level might bring happiness, which actually is not the case in reality. In economic science this puzzle between income and happiness is termed as ‘Easterlin Paradox’. Richard Easterlin in late seventies while studying the income-happiness hypothesis in US and later a group of developed countries found that, despite economic growth and happiness being correlated in short run, income growth does not result in upward trend of life satisfaction.
The paradox later carried out in the developing countries provided almost the similar outcomes. Hence the Easterlin paradox may seem to be peculiar, but it actually reflects the fact that long term trends in happiness and income have negative correlation. Looking from a country specific context growth happiness tradeoff seems to be well echoed in Indian context as well. Despite being the fastest growing economy with highest growth in terms of numbers among its neighbors, India is ranked lowest at 140 on world happiness index. The world happiness index is derived from a set of factors like life expectancy, social support, GDP growth, personal freedom, health, generosity and trust in government. India ranks much lower than its neighboring countries like Pakistan (67), China (93), Bangladesh,(125) and Srilanka (130) in the world happiness index. During the past decade India has witnessed a sharp decline in happiness level, which is not the case with its neighboring countries like China and Pakistan being also the populous countries.
Based on Gallup survey data for the time period 2006 to 2018 the level of happiness in India has witnessed a highest decline of around 1.5 points. The happiness score is calculated based on the national average response to the question of life evaluations, which asks respondents to imagine a ladder, with steps 0 (worst possible life) to 10 (best possible life). Although there exists a tradeoff between income and happiness as shown by the empirically tested theories earlier across the countries, but the sharp decline of happiness level in India even in short run reflects a new puzzle. The tradeoff is mainly attributed to the rise in levels of aspiration among people with increase in per capita income. But this likely is not the case in India, where aspirations are mainly reflected in absolute terms, whereas happiness being a subjective well-being is mainly revealed in relative terms. Thus the changing socio-economic factors like income inequality, political pressure, marginalization and lack of economic opportunities are the likely reasons of decline in life satisfaction. Income inequality in India is highest and the gap between rich and poor is widening due to poor distributional measures.
Income inequality is having a significant impact on factors like health, human and social capital which are keys to the level of happiness regardless of income growth. Similarly lack of economic opportunities creates the barriers within and across the socioeconomic groups affecting the levels of welfare in society which is on a significant rise in India. The other possible factors include poor policies, marginalization, intolerance, lack of freedom, and trust deficit which only worsening over the time. To conclude, although there should be surge for rise in per capita income levels, but it should not be aimed as a sole purpose. Policy makers must focus on wide-ranging approaches enhancing capabilities in order to achieve the better levels of happiness and well-being along with income growth.
(Author is a Research Scholar, Economic Demography)