Does income matter for children’s happiness?

Gundi Knies is Research Fellow at the ESRC-funded Research Centre for Micro-Social Change and Understanding Society, both based at the Institute for Social and Economic Research at the University of Essex.

Children’s response to economic hardship

As a teenager I read that children living in households affected by unemployment showed socio-psychological responses to their family’s economic hardship that were similar to their parents’: They had more headaches and were sadder, and – like their parents – they felt ashamed and tried to hide their economic hardship from others. They did not feel like they belonged.

This had a profound impact on me. At university, I learned about poverty and social exclusion and was impressed by the government of the time’s ambitious pledge, in 1999, to end child poverty by 2010. Child poverty rates in Britain had been among the highest in OECD countries, and the newly implemented policies looked well placed to address a great deal of the issue. Excellent news!

The link between child poverty and children’s happiness

Child poverty rates did indeed half over the period 1999-2008. Yet, despite this, children in the UK came out at the bottom of the league table of subjective, or self-reported, wellbeing. Was there perhaps no link between children’s material and subjective wellbeing after all?   

I had come across numerous studies that suggest that income matters for happiness, albeit based on research with adults. The small number of quantitative studies on children’s happiness did not corroborate the association. What’s more, most of the studies had taken place in the classroom, which means children were from similar backgrounds, the income measures were much cruder than those used in research with adults, and many aspects of life that may be correlated with both income and happiness – such as the community context and health – were not considered.

With the arrival of data from interviews with around 5,000 children aged 10-15 taking part in the first wave of Understanding Society it was possible to provide evidence on the association between children’s life satisfaction and material well-being using a more comprehensive modelling framework. The empirical results did not suggest an association between income and children’s happiness.

Instead, it suggested that children may be receptive of more visible aspects of their material situation, and that they are unhappier than their more well-to-do peers if they cannot afford to enjoy goods and activities perceived as necessities by a majority of the population, such as holidays and school trips.

But then things got tougher

Sincce the Great Recession in the 2000s, child poverty rates in the UK have been on a steep rise again and a number of programmes designed to address structural disadvantage from the early years were phased out. I decided to revisit the question of whether income matters for children’s life satisfaction.

This time I considered even more aspects of children’s living circumstances that may explain why some children are happier than others. This included the neighbourhood context and school holidays. Most importantly, I could take advantage of more powerful longitudinal data.

We followed the same children over a period of up to five years, it was possible to show that:

• richer children tend to be more satisfied with life than their less well-off counterparts (just like adults)
• it mattered more the poorer the child is
• at every point in the income distribution, older children (so, those aged 13-15, but not those aged 10-12) got happier when their family improved their income position over time, and vice versa
• children are unhappier if they are excluded from perceived necessities, such as holidays and activities with friends due to their family not being able to afford it.

We should also bear in mind that children have a limited ability to notice the exact income of their family, so it is difficult to identify an effect of income changes on children’s happiness.

Increasing income is only part of the story

Income does matter for children’s happiness. But the income effects were small and we may conclude that maximising wellbeing in this age group means more than simply increasing their family’s income. Of course, this only applies to the effect on how children and young people rate their own wellbeing; there may well be bigger effects on structural outcomes!

On the other hand, as more and more children find themselves at the bottom of the income distribution, where extra money is appreciated the most, income may become more important to children’s rating of their own happiness.