If you’re interested in how the figures for your chosen policy areas are calculated, you’ll find a short guide to the evidence and assumptions underpinning each of our welbeing domain areas in this section. Click on the one(s) that interest you to go direct to each section:
The full academic review of evidence of wellbeing interventions literature is also available here.
A recent review by Public Health England (2014) investigates the link between pupil health and wellbeing and attainment in schools, pointing out difficulty in establishing causality, given the interrelationships. On one hand, life satisfaction at age 19 is found to be positively correlated with previous results in GCSEs exams (Department for Education 2011). On the other hand, Gutman and Vorhaus (2012) show that child emotional wellbeing – capturing the extent to which the child worries and is anxious about things that may happen in the future or happened in the past – affects his subsequent academic performance, measured in terms of value-added from Key Stage 1 to Key Stage 2.
The relationship between children’s’ wellbeing and academic outcomes is complicated by the fact that wellbeing of children at school reflects not only their emotional and psychological state, but also social and behavioural elements (Gutman and Vorhaus, 2012). Flook et al. (2005) estimate that around 25% of school performance of primary school children is explained by the quality of the relationship with other children. Victimization experiences of primary school students negatively impact subsequent academic achievements (Foreman-Peck and Foreman-Peck, 2007 and Vignoles and Meschi 2010). Along the same lines, Delgado et al. (2015) shows that having close friends increases the sense of school belonging, in turn having a positive effect on school attainment. A similar result is also found among college students (Pittman and Richmond 2007).
How to value educational achievements
Increased educational attainment can be valued in a number of ways. Hunt and Vernoit (2014) estimate for example the value of improved GCSE performance (i.e. achieving 5+ GCSEs awarded A*-C instead of any lower achievement) using the Department for Education’s lifetime productivity estimate. This is about £60,000 for the single individual, not taking into account the wider benefits of education. Another recent study by Conlon and Patrignani (2015) of London Economics uses data from the British Cohort Study to focus on the returns to A-levels, distinguishing by gender and STEM vs. Non-STEM subjects
WellWorth assumptions on educational achievements
Given the difficulty in establishing causality in the wellbeing-education relationship, the user is asked to provide additional information about the percentage of children achieving more than 5 GCSEs A*-C at entry and exit. The improvement in educational achievement is evaluated in terms of the lifetime productivity increase, which is around £60,850 in 2015 prices.
Improved wellbeing may lead to changes in behaviour which may have an impact on the environment. Although the literature is quite scant, there is some evidence suggesting that happy people are more likely to engage in activities connected to the environment, such as choosing environmentally friendly household products, recycling and donating money to environmental organizations (Duroy 2008). They are also more disposed to pay more taxes for environmental protection (Sulemana, 2016).
How to value environmental change
There is a vast literature on the valuation of environmental change. Examples of different environmental changes that can be valued in monetary terms include:
- Changes in greenhouse gas emissions/carbon sequestration – which can be valued either using estimates of the “social cost of carbon” or market values for carbon.
- Changes in recreational provision – which can be valued using either revealed preference methods (e.g. travel costs) or stated preferences (e.g. surveys using contingent valuation).
WellWorth Assumptions on environmental change
The user needs to state whether the wellbeing intervention has an environmental impact, and in particular whether there will be a carbon saving or increase, the number of tonnes of carbon increase/decrease and the number of years over which this will happen. Change in carbon consumption is evaluated using the short-term traded sector carbon values provided by DECC (2015).
Given the multidimensional nature of health, the literature assessing the link between health and wellbeing has focused on different health outcomes (Howell et al. 2007). It has been shown that wellbeing improves health via healthier lifestyles as well as the beneficial biological and physiological responses of the human body to wellbeing (Ong 2010). In a review of the literature, Pressman and Cohen (2005) distinguish among studies examining the effect of wellbeing on “longevity”, “morbidity”, “survival”, “self-assessed health status” and “severity of diseases”. Given the difficulty of evaluating some of these outcomes, WellWorth focuses only on the effect of wellbeing on mortality and the relationship between wellbeing and lifestyle.
A large part of the literature has analysed the link between wellbeing and mortality, with happier people being found to live longer. In examining this relationship, most of these studies have also taken into account individuals’ health practices, such as physical exercise, smoking and drinking habits. This suggests that happiness affects health directly, not only via a healthier lifestyle.
These results are particularly relevant for older people. Follow up studies using data for the US (Moskowitz et al. 2008) and Germany (Wiest et al. 2011) found positive affect significantly decreases risk of death among individuals aged over 65, even controlling for negative affect and physical activity. The results of these two studies also suggest that in younger adults the relationship between subjective wellbeing and mortality is mainly mediated by physical exercise (with happier individuals living longer thanks to higher levels of physical exercise).
Along these lines, Steptoe et al. (2015) use ELSA (English Longitudinal Survey for Ageing) data on older people and show that wellbeing is associated with lower mortality even controlling for negative affect, medical condition and lifestyle. In particular, a 30% lower risk of death is found when comparing the highest and lowest wellbeing quartile over an 8-year follow up. A similar result is found by Ostir et al. (2000) on a sample of Mexican Americans aged 65-99 followed over a 2-year period: a high positive affect score reduces mortality risk, this being only partially mediated by medical conditions at baseline.
Some studies also show a stronger association between wellbeing and mortality among healthy individuals than among non-healthy. As suggested by Veenhoven (2008), “happiness does not cure illness but it does protect against becoming ill” (p. 449). Among others, Xu and Roberts (2010) examine longitudinal data for the Alameda County in California showing that a unit increase in wellbeing (measured using several indicators) is associated with lower mortality risk (ranging from 1.1% to 9.6%). While no clear difference in found between the younger and the older sample, the association is much stronger among healthy individuals than among the non-healthy.
It is possible to conclude that the effect of wellbeing on longevity is quite relevant, especially for healthy individuals and older people. However one must bear in mind that it is difficult to generalize these results, as they come from studies carried out using different techniques, different measures of wellbeing, focusing on different populations and different age groups (Veenhoven 2008, Diener and Chan 2011). In a recent review of this literature, Diener and Chan (2011) quantify the effect of wellbeing on mortality in 4 to 10 additional life years. Diener and Chan also report the results of a meta-analysis carried out by Howell et al. (2007), suggesting a 6-year difference in longevity for individuals with a two standard deviation difference in wellbeing.
How to value mortality
One common metric to evaluate changes in mortality risk and benefits to health is that of Quality Adjusted Life Years. Distinguishing life years from QALYs is very relevant, as Quality of Life in the general population is never equal to 1. Moreover, Quality of Life decreases with age, is always higher for men than for women (Claxton et al. 2015, p. 57) and is sharply reduced in case of serious illnesses (p. 58).
Wellbeing can result in increased exercise and healthier lifestyle, this leading to better health outcomes. At the same time, physical activity plays an important role in the risk of developing depression symptoms (e.g. Framer et al. 1988 and De Moor et al. 2008), suggesting that the relationship between wellbeing and health behaviours is likely to be bidirectional.
The association between life satisfaction and health behaviours has been analysed in several studies, some of which are reviewed here. However, to the best of our knowledge, there is no clear evidence of the existence of a causal relationship going from former to the latter.
Using data from the International Health and Behaviour Study, Grant et al. (2009) show that high levels of life satisfaction are associated with a greater likelihood of being non-smokers, doing more physical exercise, using sun protection, eating fruit at least once a day and avoiding fat. Similarly, Allgӧwer et al. (2001) find a positive correlation between the presence of depression symptoms and a number of negative behaviours, such as being a smoker, doing little physical activity, having poor sleeping habits and not using seat belts. The Copenhagen City Heart Study (Schnor et al. 2005) find a significant association between level of physical exercise and life dissatisfaction, with “joggers” and individuals with “high” levels of physical activity being less likely to be dissatisfied with life respect to inactive persons. Using data drawn from the Health Survey of England for 2008, Blanchflower et al. (2013) analyse the link between fruit and vegetable intake and mental health, measured through the General Health Questionnaire (GHQ). Results suggest that daily fruit and vegetable intake is associated with better mental health, although the dose-response relationship is not linear.
How to value health behaviours
Positive health behaviours are recognised to lead to important health benefits, such as reductions in blood pressure, respiratory problems, cardiovascular illness and levels of obesity. Reiner et al (2013), in a systematic review of the literature, find that regular exercise reduces risks of the development of coronary heart disease, type 2 diabetes, dementia and Alzheimer’s disease.
Valuing all these conditions can be quite challenging, given that different diseases can have a different impact on the quality of life of the individuals, are also associated with different mortality rates and different treatment costs.
Fortunately, there are a number of tools that can be used to derive economic values of the health benefits of increased exercise. These include:
- Health Economic Assessment Tool (HEAT) – HEAT, the WHO-Europe Health Economic Assessment Tool, developed for analysis of the health benefits of walking and cycling via estimation of effects on mortality.
- MOVES tool, developed by Sport England to help estimate the return on investment for sporting activity. This tool helps in estimating the QALY gains and cost savings through avoided disease. MOVES allows selecting the type, frequency and intensity of different physical activity.
WellWorth Assumptions on Health
WellWorth assumes a 6-years difference in longevity for people with maximum level of life satisfaction versus people with minimum life satisfaction. This applies to people aged more than 65 only. Additional life years are assumed to be worth £30,000 – the value of a QALY. However, if the user has also included in his evaluation the direct wellbeing module, to avoid double counting the value of wellbeing is taken out and £19,440 is used instead.
Additional life years are assumed to take place at the end of life. Therefore, they will be included in the evaluation depending on the life expectancy of people aged more than 65 and on the time frame of the analysis. In particular, life expectancy of people aged more than 65 is estimated using the latest life tables produced by the ONS for the UK. Time expectancy at each age is compared to the time frame of the analysis. This gives the proportion of people aged more than 65 affected by the increase in wellbeing before the end of the wellbeing evaluation.
As no empirical evidence of a causal relationship between wellbeing and physical exercise has been found, the user needs to fill in some additional information about the entry and exit level of physical activity. To evaluate the effect of physical activity, WellWorth uses the assumptions behind the WHO-Europe (2014) Health Economic Assessment Tool – HEAT for walking. HEAT for walking has been developed for analysing the health benefits of regular walking via estimation of effects on mortality on the adult population (aged 20-74).
The main assumptions on which HEAT is built are the following:
- walking 168 minutes/week reduces mortality risk by 11%
- the relationship between volume of walking and reduction in mortality risk is linear, so if I double my time spent walking, I halve my mortality risk
- the benefit from walking is capped at 30%: walking more than 458 minutes a week does not reduce mortality risk any further
- it takes 5 years for a change in physical activity to actually impact mortality risk
The benefit of increased physical activity is measured in terms of number of deaths avoided, given that mortality rate in the UK is around 434.10 per 100,000 people per year for the age group 20-74. Avoided deaths are evaluated by the HEAT tool using the value of a statistical life in the UK, this being £3,229,000 in 2011.
WellWorth replicates these assumptions for evaluating physical activities. As a consequence of this, whenever the time frame of the analysis is lower than 5, the value of physical activity is null. WellWorth also assumes that the benefit of walking applies to the population 18-65, given the age-bands used in the age structure of the population. The value of a statistical life has been updated to 2015 prices, to approximately £3,450,000.
The Intrinsic value of wellbeing
Monetary valuation of wellbeing is still in its relative infancy (Cox et al., 2012). One method used for the monetary evaluation of wellbeing is to equate a loss of wellbeing with a level 3 mental health problem (i.e. severe problem) and use Quality Adjusted Life Year (QALY) weights assessed by health economists (Centre for Mental Health, 2010). QALYs bring together both mortality and morbidity outcomes in a common metric – with a value of 1 indicating a year in full health and 0 indicating death. This measure is used by NICE in evaluating the cost-effectiveness of outcomes – and seeing if a threshold for cost-effectiveness is met. A common “threshold” used is £30,000 per QALY. Taking the loss of QALYs from a severe mental health condition (0.352) and multiplying by the NICE Cost Effectiveness threshold of £30,000 gives a value of £10,560 per year for overall wellbeing.
Another method for valuing changes in subjective wellbeing developed in recent years adopts the “life satisfaction approach” (see Fujiwara 2013 and Frey et al. 2009). This approach uses survey based methods to relate changes in life satisfaction to changes in income and other non-market goods. Starting from the analysis of the relationship between life satisfaction and income, this method can be used as a way to value changes in provision of a range of non-market goods, including wellbeing (HMT, 2011).
WellWorth Assumptions on the intrinsic value of wellbeing
WellWorth assumes that overall wellbeing is worth £10,560 per year, this being measured in terms of life satisfaction: such an amount of money would be required to compensate for being not at all satisfied with life, respect to be fully satisfied.
Wellbeing transmission: Parent-child relationship
A large literature has shown that members of the same family share a large part of their wellbeing, this being the result of a genetic predisposition towards happiness and of being affected by the same environmental shocks (see among others Clair 2012 and Ben-Zur 2003). In England, wellbeing variance at the household level accounts for around 17% of individual wellbeing variance (Schields and Wheatley Price 2005). This is around 44% in Germany for long-term wellbeing (Winkelmann 2005). Some authors have analysed the transmission of wellbeing from parents to their children using BHPS data, finding that children are affected to a different extent by their parents’ wellbeing, with fathers having a greater impact than mothers (Clair 2012 and Powdhavee and Vignoles 2008).
WellWorth Assumptions on the parent-child relationship
Following the results by Powdthavee and Vignoles (2008), using the wellbeing conversion tool and rescaling wellbeing indices into the scale we are using, WellWorth assumes that a 1-point increase in the life satisfaction of fathers leads to a 0.08 increase in their child’s life satisfaction one year later. Mothers’ life satisfaction influences only girls and to a lesser extent than fathers: 0.06.
The literature has found an association between wellbeing and a number of social behaviours (for reviews, see Aspinwald 1998, Lyubomirsky et al. 2005, De Neve et al. 2013 and Quick and Abdallah 2015). It has been suggested that happy individuals have closer social relationships with others, are more likely to have favourable opinions of others as well as to engage in social activities (Waugh and Fredrickson 2006, Baron 1987, Cunningham 1988). A correlation exists also between wellbeing and the probability of engaging in prosocial activities (Thoits and Hewitt 2001), getting married or getting divorced (Luhmann et al. 2013, Marks and Fleming 1999).
It is also widely recognised that a number of these social outcomes are actually linked to wellbeing in a simultaneous relationship. Happy people like spending time with others and, at the same time, spending time with other people makes us happy. The same is true for the time spent in voluntary activities: helping people is beneficial, and not just for the others (Liu and Aaker 2008; Chiang-Ming et al. 2014, Aknin et al. 2012, Thoits and Hewitt 2001). Moreover, people enjoy spending time with happy and extrovert people (Mehl et al. 2010), while contact with depressed subjects can have a detrimental effect on our mood as well (Coyne 1976 and De Neve et al. 2013).
WellWorth takes into account the following social outcomes:
- time spent in voluntary work
- social interactions with friends and relatives
Time spent in voluntary work
Several studies analyse the association between wellbeing and prosocial behaviours, this including time spent in voluntary work. Using German data, Priller and Schupp (2011) show for example that happy people are 1.7% more likely to be a blood donor and 1.3% more likely to donate money to charities. Oishi et al. (2007) found voluntary work engagement (measured in terms of number of types of unpaid voluntary activities) is highest among people that are most satisfied with their life. Thoits and Hewitt (2001) analyse the relationship between several wellbeing indicators and engagement in a wide range of voluntary activities. Their findings suggest that a point increase in the standardized score for life satisfaction is associated with a 17% increase in hours spent in voluntary activities three years. The overall relationship modelled suggests that the relationship actually goes in both directions: helping people is beneficial, and not just for the others.
How to value voluntary work
Haldane (2014) points out that voluntary work is valuable at three different levels: for the “economic output” it produces through the unpaid work of the volunteers; for the “private” benefits the voluntary workers derive in terms of increased satisfaction with their life and also for example, the development of new skills; for the “social” benefits derived by the whole society.
Foster and ONS (2013) suggest that the economic value produced by volunteer work should be evaluated using the “replacement cost” approach, while the life satisfaction approach or the “opportunity cost” approach should be used to value the “private” benefits of voluntary activities. Foster and ONS classify different voluntary activities into three broad types of activities (professional, clerical and personal) and then use the Annual Survey of Hours and Earnings to compute the respective median hourly wages in 2001-2013, which can be used to evaluate the economic value of voluntary work. Haldane (2014) points out that the value of voluntary work is actually higher, as it affects not only the volunteers but also the life of all the individuals they get in contact with. Haldane suggests a social multiplier between 2 and 10 for every pound invested in the sector.
WellWorth assumptions on voluntary work
WellWorth assumes that an increase in life satisfaction is associated with a 17% increase in hours of voluntary work. The economic value of increased voluntary work is evaluated using the replacement cost method, and in particular, the figures by Foster and ONS (2013) about the median hourly wage paid in the UK for similar activities. Using this figure and the increase in median hourly wages derived from ONS official statistics based on Annual Survey of Hours and Earnings, this is £13.01 in 2015.
The social value reflects the benefit gained from voluntary work by the society. For this purpose, we use the marginal cost of public funds, that is around 2 for the UK.
A large amount of empirical research has investigated the link between wellbeing and social interactions. Cunningham (1988) uses a “mood induction” technique and observes that induced joy increases the willingness to engage in social, vigorous and leisure activities with respect to the neutral group, this being also the result of a different perception of the effort needed to carry out energetic activities and of the positive consequences of engaging in social activities.
Several studies have analysed the extent to which happy people have more and closer relationships with others than non-happy individuals. However, as already pointed out, the causality issue is problematic and the empirical evidence only proves the existence of correlations. Moreover, it is difficult to generalize these results, as they come from studies focusing mainly on college students.
Using different wellbeing indicators, some studies show that wellbeing is associated with an increase in time spent interacting with others and higher quality of interactions (Diener and Seligman 2002 and Berry and Hansen 1996). Studies by Mehl et al. (2010) and Waugh and Fredrickson (2006) also show that higher levels of wellbeing are correlated with the development of closer relationships and deeper understanding.
How to value social relationships
A common method to value social relationships is to use the life satisfaction approach. Fujiwara et al. (2014b) estimate that being a regular member of a social group is worth on average £1,850 per year, but with big differences by age group – this being particularly important for younger and older people. Following a similar approach, Powdthavee (2008) uses BHPS data to value the time spent with friends and non-cohabiting relatives. Using a panel data technique to control for fixed unobservable individual characteristics, Powdthavee finds that getting together with friends and relatives almost every day in respect to “less than once a month (or never)” is worth on average £85,000 per year. Meeting friends less frequently – once or twice a week or once or twice a month – is estimated to be worth respectively £69,500 and £57,500 per year.
WellWorth Assumptions on social relationships
As the assessment of the causal relationship going from wellbeing to social relationships is problematic, the user is asked to add some additional information to evaluate the effect of wellbeing on time with friends and relatives. In particular, he needs to state whether and to what extent the wellbeing intervention has an impact on time spent with friends and relatives. Time spent with friends is evaluated using the monetary values estimated by Powdthavee (2008). Considering meeting with friends and family “never or less than once a month” as reference category and inflating Powdthavee’s results to 2015 using CPI, meeting friends and family “once or twice a month” is worth £83,600, “once or twice a week” 101,100 and “on most days” £123,600.
It should be pointed out that Powdthavee’s study is carried out on people aged 16-65. WellWorth extends these results to people aged over 65. Social relationships are in fact even more valuable for older people that are more likely to live alone and have fewer social relationships.
Work and productivity
The literature has highlighted that wellbeing can have a positive impact on several labour market outcomes, for example in terms of better work history, increased income and productivity, lower job turnover and better bargaining abilities (reviews of this literature can be found in Lyubomirsky et al. 2005, Boehm and Lyubomirsky 2008, Bersane and Gibson 2007, De Neve et al. 2013, Quick and Abdallah 2015).
WellWorth focuses on the link between wellbeing on employment in terms of its effect on:
- Absenteeism and turnover.
Recent research suggests that there is a significant linkage between happiness and productivity. For example, Oswald et al (2015) use a range of experiments to test the relationship in a lab based setting and find that those who undergo what were framed as “happiness treatments” (in this case the enjoying of a comedy movie clip or provision of chocolate, fruit and drinks) respond with a 10 to 18 percent increase in productivity.
Some studies have analysed the prospective effect of wellbeing on the performance of the worker measured later in time. Staw et al. (1994) show that positive affect predicts the performance of the worker approximately 18 months later, both in terms of wage level and manager assessment. More recently, Peterson et al. (2011) specifically address the issue of causality in the relationship between positive psychological wellbeing and work performance in a sample of 179 employees working in the financial sector. Work performance is measured using manager performance evaluation and sales data. Using data collected in three different moments in time, the authors find evidence that wellbeing determines work performance, and not vice versa.
A relevant study by De Neve and Oswald (2012) uses data drawn from the National Longitudinal Study of Adolescent Health to analyse the causal relationship between happiness and income in the US. The data collected information on wellbeing at age 16, 18, 22 and 29 together with income at age 29. Two different model specifications show that higher levels of wellbeing experienced throughout life are associated with higher future earnings.
WellWorth Assumptions on wages
WellWorth will use the results by De Neve and Oswald (2012) on the effect of life satisfaction on wages later in life, i.e. if life satisfaction is measured on a 0-10 scale, a 1-point increase in life satisfaction leads to a 2.52% increase in income 7 years later. We also consider the impact of age on wage, as estimated by the same paper (i.e. a year increase in age leads to an approximately 5% increase in age). We also assume that income only rises in the 7th year. This is a conservative assumption but we have no evidence on the time profile of the earnings change.
Turnover and absenteeism
The relationship between wellbeing, absenteeism and voluntary job withdrawal has been analysed in several studies. Job withdrawal and absenteeism are the likely result of dissatisfaction with the job one is doing. A meta-analysis carried out by Bowling et al. (2010) investigates the relationship between wellbeing and job satisfaction and suggests that the two concept are linked in a simultaneous relationships: higher levels of job satisfaction increase life satisfaction, and higher levels of life satisfaction positively affect job satisfaction. Moreover, although both effects are statistically significant, the latter effect prevails.
Along these lines, Credè et al. (2007) examine a large sample of workers holding non-academic positions in a university and analyse determinants and consequences of job satisfaction. Their results show that individual dispositional characteristics, including personality traits and emotional states, influence job satisfaction, and this in turn reduces job withdrawal. These results are in line with Waters and Roach (1971), which find a significant correlation between the degree of satisfaction with the job and both absenteeism and job turnover measured one year later.
Pelled and Xin (1999) collect data on a sample of employees and examine the extent to which wellbeing at baseline influences hours of work absence and job withdrawal five months later. Their findings suggest that, even controlling for satisfaction in the workplace, positive emotional states predict lower hours of absence while, to a lesser extent, negative emotions predict both higher absence and job withdrawal. Similarly, Iverson and Deery (2011) analyse the role of positive and negative affect on a number of work-related behaviours in a sample of manual-labourers working in the automotive sector: absenteeism, arriving late and leaving early. Controlling also for job satisfaction, absenteeism is found to decrease with increasing positive affect.
How to value turnover and absenteeism
The Chartered Institute of Personnel and Development (2009) has evaluated the cost of absenteeism to be approximately £600, this including both certified and uncertified absences. CIPD also shows that absenteeism in the UK is around 7-8 days per year per employee, and around 20% of absence is not genuinely due to illness.
CIPD (2010) suggests that cost of labour turnover may be around £6,100 on average, including “vacancy cover, redundancy costs, recruitment/selection, training and induction costs”. Moreover, one should consider the time needed to fill a post, going from 6 weeks in the case of manual workers to 17 weeks for more senior positions.
WellWorth Assumptions on turnover and absenteeism
The user needs to enter information on whether and the extent to which the wellbeing intervention has an effect on uncertified absenteeism (not due to illness) and turnover. Following the results by CIPD (2010) and inflating the figures to 2015 values using the CPI, the cost per day of uncertified absenteeism is approximately £70. Using the results by CIPD (2009) and CPI, the cost of turnover in 2015 prices is approximately £7,230.