A common wellbeing approach that is used in public policy places emphasis on how people subjectively value their own life situations. Typically, these subjective wellbeing (SWB) judgements are measured using people’s responses on a 10 or 11 step scale for a question such as: All things considered, how satisfied are you with your life as a whole these days?
New Zealand’s General Social Survey asks a similar question.
In addition to looking at the average level of wellbeing in a country, we may be interested in measuring inequality of wellbeing. This paper examines the use of different techniques for measuring SWB inequality. Inequality measurement is made difficult by the fact that SWB is measured using a Likert scale (1, 2, 3, … 10) rather than a continuous scale as is the case for something like income.
We apply different measures of SWB inequality to the question of whether the degree of SWB inequality in a country affects the wellbeing of individuals in that country. We show that SWB inequality does matter for individual SWB outcomes, but the estimated relationship depends on how inequality is measured. Inequality measures which assume that SWB is continuous like income are not appropriate for measuring inequality of a Likert scale variable.
In addition, we show that the nature of the inequality – in particular, whether the SWB distribution is skewed (i.e. asymmetric) – matters for individual SWB outcomes. It also matters whether people look upwards (at those above themselves) or downwards (at those below) when they consider inequalities within the country. Thus in determining whether there is a relationship between the wellbeing of individuals in a country and that country’s inequality of wellbeing, we must be careful to take account of the precise nature of the inequalities that exist.