science & psychology

Maintaining Our Sense Of Happiness Despite Economic Hardship

Maintaining Our Sense Of Happiness Despite Economic Hardship

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us…

The novel A two of two cities by Charles Dickens opens with this famous quote. In this story, one of the characters, Doctor Manette, ends up in prison during the French revolution. Debilitated by his unfair imprisonment, Doctor Manette tries to stay sane against the odds. A subject loosely taken from Dickens’ biography, as during his youth he unsuccessfully tried to keep his father John out of jail, when he was sentenced for falling to repay a debt.

What does this have to with happiness? There is a growing body of scientific studies that examine the relationship between economic prosperity and happiness or well-being. On the one hand, these studies focus on the positive effects of [increased] income. On the other hand, studies focus on the ways in which we deal with economic hardship to maintain our sense of happiness and well-being. Studies like Economic Hardship and Well-Being: Examining the Relative Role of Individual Resources and Welfare State Effort in Resilience Against Economic Hardship by Reeskens and Vandecasteele. In their study, Reeskens and Vandecasteele examine three factors that can soften, or as they call it, “cushion”, people facing economic hardship:

  • Informal social contacts
  • Religiosity
  • Confidence in politics

Economics and happiness: some basic notions

In their article, Reeskens and Vandecasteele discuss firstly some of the common sense notions of happiness and well-being. The most basic one is that more money makes us happier. In a famous study by Princeton University, a magic number was put on the relation between happiness and income: $75,000. According to this Princeton study, people that earn less than this sum, report lower happiness and emotional well-being than people that make $75,000 or more. As their income increased to this amount, respondents reported an increase in their sense of happiness. But the study found that an income increase above this figure of $75,000 does not lead to an increase in self-reported feelings of happiness and well-being.

So does that mean that we should all aim to make $75,000, and then we will be happy? No. A recent study by the London School of Economics, Origins of Happiness, has shown that most human misery can be attributed to failed relationships and mental and physical illness, not to money problems and poverty. Social and psychological factors are more important to the well-being of individuals than income levels. As that study’s lead researcher, Lord Richard Layard has stated:

Having a partner is as good for you as being made unemployed is bad for you.

Reeskens and Vandecasteele focus their research on some of these social and psychological factors, in studying what happens because of the negative effect on subjective well-being caused by poverty and [economic] deprivation. Here again, we find some common sense notions. The most basic one is that a negative effect on subjective well-being is caused by poverty and [economic] deprivation. But there are studies like Social comparisons of income in one’s community, that show that some people are more severely affected by economic hardship than others. How come?

Money does matter. Doesn’t it?

Jumping forward to some of Reeskens and Vandecasteele’s conclusions: income does matter. According to their findings, up to 45% of our sense of happiness, or lack thereof, can be explained by our economical situation. Economic hardship does decrease our sense of well-being. But economic situation is more than just our annual income. Factors that are important as well include:

  • Employment status.
  • If we have to draw on our savings or get into debt to cover ordinary living expenses
  • If we have to cut back on things like holidays or new household equipment.

In a glass-half-full-half-empty analogy, we can also conclude that if 45% of our sense of happiness is material, economic, then 55% is not. It is in this 55% that immaterial factors like those examined, social contacts, religious practice, and confidence in politics, come into play.

Social contacts

What makes informal social contacts so important? According to a study by Halliwell and Putnam, The social context of well-being, social interactions, amongst others:

  • Reduce stress.
  • Enable material and immaterial resources.
  • Improve access to health care.
  • Enable social control to discourage behaviour that might be harmful for your well-being.
As Putnam famously put it:

Your chances of dying over the course of the next year are cut in half by joining one group, and cut to a quarter by joining two groups.

Reeskens and Vandecasteele show, by examining survey responses taken in more than 25 European countries, that having frequent contact with family, friends and colleagues strongly cushions the effect of [economic] deprivation on happiness. The difference in happiness levels between people with higher incomes and those with economic deprivation dramatically drops when we look at people with frequent informal contacts. In other words: lonely affluent people are comparatively more happier than lonely deprived people. Whereas socializing affluent people are still happier, but comparatively less happier than socializing deprived people.

 When facing economic hardship, we should try to maintain our social network, meet our friends, and go and see our family. 

Although research shows that this might be harder to do than when we have no financial concerns.

Maintaining Our Sense Of Happiness Despite Economic Hardship


The second factor researched by Reeskens and Vandecasteele, religiosity, can also cushion the negative impact of deprivation on our sense of happiness and well-being. There are two effects happening here. The first one is the social aspect of religion. Interaction with like-minded churchgoers through the support, companionship and sense of belonging that we can find in informal social contacts as well. But with religion, this effect is “supercharged”, as Lim and Putnam describe in Religion, Social Networks, and Life Satisfaction. Supercharged, because the effect is bigger than with regular [non-religious] friends or family. In that study by Lim and Putnam, it was also found that the other effect is a “private tie to God”, since religiosity offers “a comprehensive framework for the interpretation of world events”. Since religious people have a stronger sense that something outside of them controls things, they are also more likely to believe that their [economic] deprivation will be alleviated by something external.

When looking at the results in Reeskens’ and Vandecasteele’s research, taken from the same survey responses of 25 European countries, the effect of religiosity is relatively the smallest of the three factors, in “cushioning” the effect of economic hardship. There is still a measurable, statistically significant increase in feelings of happiness and well-being between frequent church-going deprived people, and those that do not go to church, when comparing both of these groups with affluent people. It must be noted, as Reeskens and Vandecasteele do, that this might be partially explained by cultural differences [the role of religiosity in Europe compared to e.g. the United States].

 When facing economic hardship, being religious or maintaining our religious practices do help in alleviating the effect of that hardship on our well-being. 

Confidence in politics

Similar to the external effect that religiosity has on the deprived, believing that politicians can alter and influence their situation is also beneficial to a sense of well-being during economic hardship. A study by Catterberg and Moreno, The Individual Bass of Political Trust, has shown that in general, the [economic] deprived have a lower level of faith and confidence in politics. But Reeskens and Vandecasteele argue that among these economic deprived, the ones that do keep faith and confidence in politics, are happier than those that don’t.

Their results back up this claim. In the European survey responses the deprived respondents that had confidence in their governments, were happier than those deprived respondents who did not have that confidence. The differences are sharp. Pro-politics deprived people are only slightly less happy than their affluent counterparts. But negative-towards-politics deprived people are strongly less happy than their affluent counterparts.

 When faced with economic hardship, people that have confidence in politics and government show more resilience against the negative psychological effects on happiness and well-being, than people that turn away from politics. 

What does this all mean? What to do in times of economic hardship?

So, where does this study, and studies like it, leave us? First of all: money does make us happy. But only up to a certain point. And in times of economic hardship, there are certain factors that can help us cushion its effect. The most prominent ones are having informal social contacts, and keeping faith in politics. Being religious does help as well, but not as much.

For a totally different perspective on all of this, we can also start with the premise of psychologist Sonja Lyubomirsky’s The How of Happiness. In that book, she states, backed by other research, that 50% of our happiness level is genetically determined [based on twin studies], 10% is affected by life circumstances and situation, and 40% is subject to self control and manipulation. When looked at it from that perspective, our economic circumstances are part of the 10% that also include physical health, love relationships, feelings of safety, etc. It might be wise to focus more on the 40% that we can change and manipulate. As some of the strategies that Lyubomirsky proposes are to cultivate optimism, to avoid ruminating/ over-thinking, and to develop coping strategies. And, gratitude/ counting your blessings, as hard as it may be when faced with the next bill or credit card statement…




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