How are we going? Happy?

How are we going? As a nation that is - or rather, as 20 odd million people (or is that 20 million odd people?) on our wide brown island continent.

Here’s three ways to answer - the good, the bad and the ugly - not necessarily in that order. First we can look at our income.

Economic reform and some luck has seen us rocketing back up the international league ladder of economic prosperity. At the end of the 19th century Australia (and Argentina), had the highest average income in the world. By playing to our strengths in agriculture and minerals (like gold) we could afford to pay ourselves incomes that were the envy of the world.

With industrialisation making scale economies increasingly important, our fall from the top of the tree was probably inevitable. But the extent to which we contributed to our fate is shown by the way in which our reversals of protectionist policies have sent us back up the league ladder from around 15th in 1990 to 7th today.

Still that’s just average income. Money doesn’t buy you happiness right? More of that in a sec. But even if it did buy you happiness, there are other obvious objections to using average income even to measure economic wellbeing.

If you clean your house, or cook dinner no money changes hands so your production isn’t measured. Get in a cleaner or cook, their income rises and it registers in the national accounts even though your tummy is no fuller and your house no cleaner. Put starkly, a bit of quiet love-making at home does nothing for the national accounts. Visit the local brothel and you’re doing your bit to take us another notch up from seventh on the league ladder of national wealth. Your patriotic duty perhaps?

Still, for all its faults income growth per capita isn’t all bad as a measure. Growing income is a huge help in tackling social problems. It reduces unemployment - a major cause of human suffering. And it gives us “momentum”. We’re much more prepared to be generous when it comes to redistributing growth in our income than we are about the income we’ve got used to.

Still, it is only money.

The United Nations Development Index (HDI) (pdf file 707KB) is an attempt to broaden this perspective. The idea is that wealth is only a means to a more important end of human wellbeing goes back at least to Aristotle. HDI tries to focus on “enlarging people’s choices”.

Of course money is very important in enlarging people’s choices - particularly when they don’t have much of it! So it’s measured in the HDI. But so too are things like life expectancy, and educational opportunities. With those two additional measures thrown in, Australia does even better than on per capita income alone.

The HDI methodology had us further in front for longer early last century and falling far less during the 70s and 80s than we did, judged by average income alone. And our position on the UN’s HDI has recovered even more strongly than our per capita income: from 14th in 1990 to 3rd in 2004 behind Norway and Sweden.

But before you get too smug about it there’s at least one other measure you should know about. Even education isn’t an end in itself but a means to a more fulfilled life.

Having lectured the world for over a century on “utility”, economists have finally got interested in asking people how happy they are. It’s a tricky subject. The studies usually ask you to rate yourself - often from one to seven (there are seven days in the week, seven deadly sins, and now it seems, seven degrees of happiness!)

Are all “fives” really happier than “sixes”, or is their “internal scoring” just different? Who knows? But despite their inexactitude, there are consistencies in happiness studies that suggest that differences in people’s internal “happiness metres” tend to come out in the statistical wash. Those who are single rate themselves unhappier than those in partnerships. And those who don’t enjoy their jobs are less happy than those who do.

But here’s the surprise. As we’ve seen, our incomes are above average and we’re well above average if you throw in the state of our education and health. But for all our laconic confidence that “she’ll be right”, we’re only average when it comes to happiness.

Perhaps we’re just less fulsome in our assessment of our own wellbeing?

Perhaps. But one thing stands out. We rate our job satisfaction well below those in most other western countries rate theirs. That’s grist for the mill of those opposing the IR changes which will further depress our job satisfaction. Or is it? We rate below all the other English-speaking countries (other than Canada which wasn’t in the survey). And guess what? We’ve got the least deregulated labour market in that group.

Maybe the IR changes could improve job satisfaction? But that’s a topic for another day.