When Economic Growth Doesn’t Make People Happy

That economic expansion leads to greater well-being is a central tenet of modern thought. And yet, that’s not what is happening in America today.

Toru Hanai / Reuters

In 2013, UNICEF released a report comparing the well-being of children in 29 of the world’s most advanced nations. The report compiled data on health, safety, education, behavioral factors, living environments, material well-being, and subjective “life satisfaction” surveys from children themselves. The United States landed near the bottom on almost all measures, ranking 26th out of 29 countries; only Lithuania, Latvia, and Romania performed worse.

Somehow there is a huge disconnect between this country’s prosperity and the well-being of its families. According to the traditional economic view, growth and productivity as measured by GDP are key markers of the success of a society. The UNICEF well-being report underscores just how incomplete is this conventional view. Cities and countries with rising incomes have been confronted by the paradox of unhappy growth, in which increased GDP per capita has not led to increased well-being.

Early cities appear to have been fairly egalitarian. Engong Ismael, a Balinese anthropologist, describes them as characterized by a horizontal caste system with clearly defined roles—each caste respected for its contribution to the health of the community. But as urban cultures developed they became more hierarchical. Most of the grand monuments of the past were built by slaves or indentured labor. As a city grew more prosperous, if the gap between the richest and poorest was perceived as too great, the social cohesion of the city suffered. In the cases of the Mayan and Russian empires, when stressful environmental conditions were accompanied by a low collective sense of we-ness, social unrest followed, and even collapse.

People move to cities because they seek opportunity, hoping to improve their lives, not to stay mired in a lifetime of poverty. Poverty is extraordinarily debilitating, and its persistence limits the ability of a city to thrive. One goal of any well-tempered city must be to provide opportunity for all of its residents to reduce their suffering and improve their well-being. Material prosperity doesn’t necessarily lead to happiness, but grinding poverty certainly makes people more likely to be unhappy, unless they believe that there is a pathway to a better life. Some aspects of poverty also have a contagious negative effect on the life of a city, including toxic stress, PTSD, inadequate or insecure housing, joblessness, and low-quality education that doesn’t give people a chance to successfully compete in the 21st century. Increasing a low-income household’s income is an essential first step to improve factors that contribute to well-being, such as housing, health, and education.

Urbanization is deeply linked to economic development. For much of the 20th century the presence of cities was correlated with wealth. Those nations with the highest per capita income were the most urbanized. But for a growing number of cities in the developing world, urbanization does not necessarily rise in parallel with economic growth, nor with increased individual wealth. The forces of civil war, tribal and religious violence, rural poverty, and climate change are driving most of the 200,000 people a day, across the globe, who now move to cities. And if the cities they reach do not have the economic, technical, political, and social structures needed to create communities of opportunity for these migrants and refugees, those cities will grow in numbers, but not in prosperity or well-being.

Following World War II, the World Bank focused a great deal of effort on the economic development of cities in order to overcome the negative effects of poverty. In many cases its efforts produced positive economic results, yet many of the people living in cities today are no happier. The complexities and uncertainty of the modern world are stressful and difficult to navigate. Even the wealthy have not been made much happier by economic development. It turns out that  although money is essential to thrive, there are many other important elements of happiness, too. But until recently people have known more about how to develop prosperous cities than they have about developing happy ones.

In 1974 the University of Southern California professor Richard Easterlin published a groundbreaking paper, “The Economics of Happiness.” Easterlin’s paper, which analyzed the comparative happiness of nations, indicated that rising incomes increase the happiness of individuals in lower-income countries, but that as the prosperity of nations rises it hits a point beyond which additional income doesn’t make people any happier. This phenomenon has come to be known as the Easterlin paradox. There’s no doubt that many direct causes of suffering among poor people are alleviated by an increase in their income, yet it’s also clear that income is not the only driver of happiness.

In a 2009 study of 450,000 Americans, the economists Angus Deaton and Daniel Kahneman discovered that for Americans happiness seemed to level off at a household income level of $75,000. Earnings beyond that, even far beyond that, didn’t seem to make people much happier. Interestingly, the $75,000 limit had nothing to do with the cost of living; people were just as happy earning $75,000 in expensive cities like New York as they were in much lower-cost cities. One reason for this may be that although the cost of housing is higher in larger cities, the cost of transportation and food is lower, and there is a much larger selection of goods and services. In fact, as the size of a city doubles, the number of things to buy increases by 20 percent, and their cost declines by 4.2 percent.

But there is a deeper reason. Happiness is tied to what Deaton calls emotionally enriching social experiences. Kahneman says, “The very best thing that can happen to people is to spend time with other people they like. That is when they are happiest.” The way people spend their time is also a critical component of sense of well-being. In another study Kahneman and his colleagues tracked how people experience their day by asking them to record events in fifteen-minute intervals and evaluate them. Walking, making love, exercise, playing, and reading ranked as their most pleasurable activities. Their least happy activities? Work, commuting, child care, and personal computer time. How many people really enjoy a night of plowing through endless emails?

This survey should not mislead us about the value of work. Work can be deeply gratifying and meaningful, and it can also provide rich social relations. Employment is a key element of well-being. People who are unemployed or underemployed are statistically more likely to die younger and be in worse health. People who lose their job in middle age and have difficulty finding a new one are more likely to become depressed, and have a two to three times higher risk of heart attack and stroke over the next ten years. So one of the key challenges of cities in the 21st century is to develop economies that generate stimulating, productive work for all of their residents.

In the past people often held the same job for life, whether as a shepherd, a member of a medieval guild, or an employee of a large corporation. Today the average Millennial will have had 11 jobs by the time he or she reaches the age of 40. This underscores the need to acquire many different skills beyond technical ability. Satisfying work often requires not only a high level of education, but the emotional and social intelligence required to work successfully in teams. This wider range of qualifications will be essential in a world where computer coding may become the entry-level position that a factory job once was. As agriculture becomes more and more industrialized, rural people are flocking to cities seeking work. Yet with robots increasingly taking line positions in factories, there are likely to be fewer jobs for the uneducated in the future.

So what is the future of work in cities? Keynes predicted that automation would lead to more leisure, but achieving that requires a wider distribution of economic benefits than the global economy is designed for. Instead of Keynes’s vision, there are fewer opportunities not only for the uneducated, but also for those who are educated but poorly adapted to the rapidly changing conditions of work. Unemployed and underemployed people tend not to be happy, so this is an issue that threatens to tear the guts out of the social contract.

This article has been adapted from Jonathan F.P. Rose’s forthcoming book, The Well-Tempered City: What Modern Science, Ancient Civilizations, and Human Nature Teach Us About the Future of Urban Life.