Measures of national wellbeing offer insights into how the pandemic has affected people’s lives – from their personal finances to relationships with family, friends and even nature. The cost of living crisis that is squeezing household budgets is likely to reduce life satisfaction.
People’s wellbeing is affected by a range of factors from their finances and surroundings to their personal relationships. Collectively, individuals’ wellbeing contributes to the quality of life in a country.
In the UK, data on ten indicators (referred to as ‘domains’) on the wellbeing of the nation are collected to form the ‘Measure of National Wellbeing’ framework. These factors are those that the public report as mattering most, namely: personal wellbeing, relationships, health, what we do, where we live, personal finance, economy, education and skills, governance and environment.
New data released by the Office for National Statistics (ONS) provide an update on personal and collective wellbeing in the UK. This is the first data release since 2010 and therefore the first to include the effects of the Covid-19 pandemic. Some of the data cover more recent months than others.
What has happened to people’s personal finances and how has this affected their wellbeing?
How well individuals and households are managing financially is important for their wellbeing, as this influences life satisfaction, happiness and anxiety levels. Looking at average income is therefore a useful measure of personal and national wellbeing.
Inflation-adjusted median household disposable income in the UK was £31,385 in the financial year from April 2020 to March 2021. This is both a short- and long-term increase from previous years (see Figure 1).
Figure 1: Median equivalised UK household disposable income (in 2020 to 2021 prices)
Source: ONS
Looking at subjective measures of financial wellbeing also suggests an improvement in personal finances. In 2019/20, 44.5% of adults reported that they were satisfied with their household income, up from 42.8% in 2014/15. But at the same time, 7% of adults reported that they found it quite or very difficult to manage financially in 2019/20.
Crucially, these figures cover a period prior to rising inflation and the cost of living crisis. Indeed, they don’t fully include the pandemic either – a time when many individuals experienced drops in income due, for example, to being furloughed.
Current increases to households’ costs – particularly energy bills – are becoming a major source of concern and are expected to have a significant effect on people’s attitudes and financial wellbeing in the immediate future.
What has happened to wider economic indicators?
The country’s economic position affects people’s income and wealth, the state’s ability to provide public services, job creation and living standards. It is therefore an important contextual factor for measuring national wellbeing.
The pandemic brought large parts of the economy to a halt, with the government responding by increasing social support spending (for example, through the furlough scheme).
This had a significant effect on the UK’s economic wellbeing, increasing public sector net debt to 97.3% of gross domestic product (GDP) by the end of 2021. It is estimated that once this ratio exceeds 77%, it starts to affect economic growth negatively (Caner et al, 2010).
Net national disposable income per capita was also hit by the pandemic, dropping to £24,625 in 2020 (see Figure 2). This recovered to £27,023 in 2021, but it remains below the pre-pandemic level of £28,125 in 2019.
Figure 2: Real net national disposable income per capita, seasonally adjusted, UK
Source: ONS
The economic slowdown caused by Covid-19 reduced inflation to below 1% at the end of 2020 (ONS, 2022). Since then, it has continued to grow past the initial economic recovery, with the consumer prices index including owner occupiers' housing costs (CPIH) reaching 8.8% in July 2022.
It is expected to increase further, causing concern about the rising cost of living. This is likely to have a substantial effect on national wellbeing over the coming months.
What about education and skills?
Gaining an education and/or new skills can improve people’s socio-economic outcomes, which in turn contribute to better personal and national wellbeing.
The estimated value of human capital – the total net present value of working age adults’ projected lifetime earnings – has been increasing in the short and long term in the UK, reaching £23.8 trillion in 2020. This can be explained by an increase in the number of people of working age with at least an undergraduate degree or equivalent in recent years.
The proportion of people of working age with no qualifications has also been falling, more than halving to 6.8% in the third quarter of 2021, compared with 15.6% in the third quarter of 2002 (see Figure 3).
Figure 3: Percentage of adults aged 16 to 64 years with no qualifications, UK
Source: ONS
What about other factors related to wellbeing?
Personal wellbeing is central to understanding national wellbeing. It is measured by asking people questions about how satisfied they are with their lives, whether they feel that the things that they do are worthwhile, and their happiness and anxiety levels from the previous day.
In the first quarter of 2022, these measures remained below their pre-pandemic levels, representing a long-run deterioration in personal wellbeing. But there has been some short-term improvement compared with the first quarter of 2021 (during the UK’s third national lockdown).
People’s relationships also affect their happiness and quality of life. The latest data (from June to July 2022) show that people appear to feel well connected, with a high proportion of adults feeling that they can trust most people and can rely on people in their life if they have a serious problem (both of which are measures of social capital). These high levels of social capital support a well-functioning society, which can enhance national wellbeing.
Participation in both work and leisure activities also influences people’s wellbeing, lifestyles and relationships. Following the pandemic, unemployment in the UK rose to above 5%, but it has since fallen. It stood at 3.8% in March to May 2022 – a 48-year low.
People’s ability to enjoy leisure activities was also disrupted by the pandemic, but the proportion of people who accessed the natural environment rose during the first months of lockdown and it has stayed at this new higher level.
The pandemic halted the world economy and led to months of lockdown and social distancing rules in the UK. This negatively affected numerous measures of personal and collective wellbeing, which have since started to recover following the lifting of the final Covid-19 restrictions in July 2021. But, the current cost of living crisis, uncertainty about the coming winter months and the possibility of an impending recession are expected to have a sizeable negative effect on wellbeing in the immediate future.
Where can I find out more?
- The full data release for the quality of life in the UK from August 2022 is available here.
- Previous data for 2019 with international comparisons are available here.
- Wellbeing Research Centre – University of Oxford.
- World Wellbeing Movement.
Who are experts on this question?
- Richard Layard
- Jan-Emmanuel De Neve
- Maria Cotofan
Author: Marco Vaitilingam
