Measuring people's quality of life is essential to assessing the progress of a society. It is now widely recognized that measuring subjective well-being is a fundamental part of measuring quality of life, along with other social and economic dimensions. As part of the groundbreaking Better Life Initiative project launched in 2011 to measure societal progress across eleven domains of well-being, the OECD has developed methodological recommendations for the collection and use of measures of subjective well-being. Similarly, the UN uses subjective well-being, measured by life satisfaction, as an indicator in SDG Goal 3 on Good health and well-being.
Denmark is sometimes referred to as a "welfare paradise" or "the fairy tale country", with an extensive network of interconnected social, health and welfare services. But perhaps there is trouble in paradise. The Danish Health Authority's National Health Profile 2017 showed that 25 percent of Danes experienced high levels of stress. Compared to previous national health surveys from 2010, the 2017 survey indicates that Danes' mental health had deteriorated by 3.2 percent since 2010. Critics argue that Denmark is entering a mental health crisis and that the welfare system is not effectively addressing these challenges, resulting in high human and societal costs. A key problem and research gap may be a lack of knowledge about the impact of different public services, efforts and interventions in the social field, the costs associated with them, as well as insight into opportunity costs and other alternative ways of creating quality of life.
The figure below shows that the vast majority of OECD countries that we normally compare ourselves with in Denmark have introduced national wellbeing indicators etc. However, Denmark is not among the group of countries that have adopted this type of initiative, and at the time of writing, no official plans have been announced. This is despite the fact that the other Nordic countries are already in the process, with Finland leading the way. From a societal perspective, this can make it difficult to monitor, analyze and optimize the benefits of the projects that create value for citizens and society, and it can also be considered paradoxical, given how much talk there is about well-being in our society and the amount of investments that are articulated to improve well-being, for example for vulnerable young people.
Figure 9: 85% of OECD countries with a wellbeing measurement framework use subjective wellbeing indicators based on the life satisfaction measure (LS)
Today, a wide range of states, governments, municipalities, organizations and companies collect and use data on subjective well-being indicators, especially the life satisfaction (LS) measure, to inform decision-making, policy development, public budget allocation and investment evaluations, as well as to monitor societal progress and trends.
At an overall state level, subjective wellbeing data and social valuation are used to:
OECD methodological work on shadow pricing (social valuation)
The OECD describes the valuation of non-market goods and services as shadow pricing. The OECD works with different methods for estimating shadow pricing, including revealed and stated preference and subjective shadow p ricing based on life satisfaction data and the income equivalent approach - the same approach used in the OSVB. It is recommended to use subjective shadow pricing as inputs, alongside traditional market goods, in developing and investing in large-scale welfare initiatives.
The EU Directive on CSRD, including the social ESRS standards, obliges large companies, listed SMEs covered by the Danish Financial Statements Act and certain financial institutions to report and disclose their sustainability performance according to mandatory standards set by the EU.
Figure 10: Overview of upcoming EU ESRS reporting standards
In this context, companies have a duty to consider and disclose their social sustainability, i.e. both negative and positive impact. In this context, reporting standards are needed. In this context, subjective wellbeing, life satisfaction and WELLBYs can be useful data-driven and auditable elements in corporate sustainability reporting, which in the future will be included in the company's financial statements.
Several larger companies are showing interest in this thinking, probably because the WELLBY approach offers a relevant way to quantify the impact or value of products, also for companies. For example, life satisfaction and all the social situations that this measure correlates with could be relevant for Novo in relation to diabetes, obesity and dementia, and in relation to hearing loss for Oticon or GN Store Nord, which produces hearing aids.
Large companies with more than 500 employees must report according to CSRD for the financial year starting in 2024. The reporting obligation for the other large companies (companies that in two consecutive financial years exceed two out of three of the criteria: Balance sheet total: DKK 156 million, net turnover: DKK 313 million and number of employees: 250) will apply for the financial year starting in 2025 or later. Listed SMEs will subsequently be subject to the requirements for the financial year starting in 2026. In total, approximately 2,300 Danish companies are expected to be covered, including a number of financial companies.
In Sweden, the topic of Swedes' quality of life and the development of a national wellbeing measurement framework has been on the political agenda since 2010. The Swedish government has launched a number of initiatives, including work to build bridges to EU and OECD approaches and recommendations in this area. Against this background, in 2012 the Swedish government initiated work on "Nya mått på välfärd och livskvalitet i samhället" (New measures of welfare and quality of life in society), which deals with measuring welfare and life satisfaction using subjective indicators. In continuation of this, Statistics Sweden, Statistics Sweden (SCB), has prepared the publication "Indicators of sustainable development and quality of life for budget work". This has subsequently led to the Government Office's decision to create a so-called "Swedish roadmap for economic sustainable development", which includes that the state budget must be complemented by 7 wellbeing indicators, in which subjective life satisfaction goals are included.
Along the way, Sweden has worked to align with international measurements and metrics in an attempt to account for Swedes' life satisfaction and how people value life as a whole, and has conducted several surveys. The life satisfaction indicator is included in quality of life indicator collections from the OECD and the EU, as well as in the Swedish study on quality of life measures "Får vi det bättre? Om mått på livskvalitet". From 2018 onwards, the indicator "satisfaction with life", according to SCB the core of EU-SILC, was annually implemented, thereby realizing recommendations for how life satisfaction is measured and comparability with other EU countries.
During the 2019 EU Presidency, Finland's focus was on the health and social sector and the importance of transforming the European Union into an "Economy of wellbeing".
Finland's aim during its Presidency was to stimulate an open European debate on the Economy of Wellbeing and improve understanding at the political level that wellbeing is a prerequisite for economic growth and social and economic stability, while economic growth creates more opportunities to improve the wellbeing of the population, and to have the Council of the EU adopt conclusions on the Economy of Wellbeing. These include recommendations for actions to be taken by EU Member States and the European Commission.
During the recent Finnish EU presidency, the following recommendations were adopted and the EU Council calls on member states to
Finland ran Europe's first national, state-subsidized basic income experiment.
Finland's two-year scheme, which ran in 2017 and 2018 and attracted widespread international interest, paid 2,000 randomly selected unemployed people across the country a regular monthly income of €560 (£490), with no obligation to apply for a job and no reduction in their payment if they accepted one.
Intended primarily to see if a guaranteed income could encourage people to take often low-paid or temporary work without fear of losing benefits, the scheme was strictly speaking not a universal basic income test because the beneficiaries came from a limited group and the payments were not enough to live on.
The Universal Basic Income (UBI) pilot led to people building startups and staying 'productive', instead of passive consumers. Guaranteeing basic necessities isn't about 'not working' - it frees up time for people to pursue what they love.
"The basic income recipients were more satisfied with their lives and experienced less psychological strain than the control group," concluded the study, conducted by researchers at the University of Helsinki. "They also had a more positive perception of their financial well-being."
The researchers also noted a mild positive effect on employment, especially in certain categories such as families with children, adding that participants also tended to score better on other measures of wellbeing, including greater sense of independence, financial security and confidence in the future.
Many of the countries that are furthest ahead in integrating subjective wellbeing metrics and social valuation into their public systems have set politically agreed societal goals for the development of wellbeing in society.
A good example of this is the UK, where the white paper "Leveling Up" is a strategy that aims to level up inequality in the UK by providing equal opportunities for all people, regardless of who they are and where they live. This goal is to be achieved through 12 overarching missions, one of which (mission 8) is to improve wellbeing:
"By 2030, wellbeing will have improved in all areas of the UK, the gap between the top performing areas and other underperforming areas will have closed".
Another trend or way in which these subjective indicators are used by governments is in the design, assessment and evaluation of policy. The UK Green Book is designed to provide policy makers with technical guidance on good practice in policy making. The Green Book provides examples of how subjective wellbeing can be used as a means of long-term assessment and estimation of social disadvantages and benefits of a program, and to guide on methods for valuing non-market goods and concrete valuation of social change. The Green Book and its accompanying technical appendices include explicit recommendations on how and when to use both cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA). Likewise, The Magenta Book, a related publication for policy evaluation, also covers CBA and CEA as methods for assessing the value-for-money of a policy.
UK HM Treasury Green Book
The UK Treasury launched the first Green Book in 2020 : Central government guidance on appraisal and evaluation, and has launched a new version every year. The Green Book helps officials advise policymakers on how to achieve a specific policy goal and maximize social value, and sets out a rigorous but pragmatic approach to weighing up costs and benefits. This is essential for designing interventions that maximize the delivery of economic, social and environmental returns to UK society for every pound of public money spent.
In addition, in 2021 they have published the Valuation of Wellbeing Supplementary Guidance to the Green Book which outlines how and where wellbeing should be considered in the relevant parts of the Green Book methodology, with an overview of the key findings from the current literature. It includes an overview of how evidence on wellbeing can inform the strategic stages of policy making, as well as step-by-step guidance for analysts on how to assess wellbeing impacts and, where the evidence allows, monetize wellbeing and include it in the cost-benefit analysis. It also provides guidance on how to include wellbeing in monitoring and evaluation in line with the requirements of the Green Book.
A Guide to Social Return on Investment
In 2009, the UK Cabinet Office published A Guide to Social Return on Investment for anyone interested in measuring, managing and accounting for social value or social impact. The primary purpose was to create a common language and understanding of social value among the private and public sectors. Likewise, it was to bridge the gap between civil society actors working to create value, public authorities providing and investing in activities and investors who want to see investments make a difference. This requires standardization in concepts and methods, which A guide to SROI brings. Later in 2012, an updated Guide to Social Return On Investment was published in a reader-friendly version .
UK Social Value Act
In 2012, the UK government passed the Public Services (Social Value) Act 2012, also known as the Social Value Act. The Social Value Act requires all public sector organizations and their suppliers to, in addition to looking at the financial value of contracts, account for how their procurement has an impact on wellbeing.
In 2020, Procurement Policy Note 06/20 was passed, which is an extension of the Social Value Act, requiring public procurement to not only explain how a procurement may impact wellbeing, but to include a plan to evaluate the social value of a contract. It has moved from statement/consideration to evaluation.
Procurement Policy note 06 emphasizes that: "it is the quality of what is being offered that will count in the evaluation, not the quantity".
Procurement Policy note 06/20 contains standard material on how public procurers and suppliers can see which policy themes they can support, as well as which social outcomes belong to the themes, and finally which success criteria need to be delivered and documented.
The Procurement Policy note states that wellbeing should be given a minimum weighting of 10% in procurement, and that a higher weighting can be used if deemed appropriate, for example, in a municipality's procurement of social interventions or services. In practice, weighting of wellbeing scores, e.g. related to young homeless people, of up to 25% has been used to ensure that the delivery of social outcomes and change, and the quality thereof, is given a central place in the procurement process and as a differentiating factor in the tender evaluation.
Social Value Bank UK
In 2014, HACT, Simetrica-Jacobs, Social Value Bank UK and 50 housing organizations developed The Social Value Bank UK. Their social value calculator has evolved through three phases:
Phase 1: development of the Social Value Bank UK with a broader set of wellbeing values, a new set of economic values and a new set of environmental values. By bringing these different methodologies together, they will ensure they are coherent, robust and avoid double counting, allowing social housing organizations to apply social value metrics across their business with confidence.
Phase 2: developing tools to use the UK Social Value Bank. These will enable social organizations to apply social value metrics across their businesses, whether in asset management and investment, ESG reporting or regulation and value for money.
Phase 3: Applying the UK Social Value Bank to housing. By developing their approach to social value, HACT will develop a range of services for social housing organizations, including social value assurance, social value audit and certification, social value benchmarking and social value innovation.
Which?
Which? is a non-profit organization in the UK working to protect consumers. Together with SImetrica Jacobs, they have analyzed how scams and fraud affect wellbeing (life satisfaction), and subsequently estimated the total impact cost of scams. Scams and fraud are a major problem in the UK. From 2019-20, 3.7 million cases were reported, making fraud the most common form of crime in the UK.
The average impact cost was estimated at GBP 2509 per victim, which exceeds the average actual financial loss per scam. The annual wellbeing loss is estimated at GBP 9.3 billion per year.
The purpose of the analysis was to reverse the political perception of this type of crime, previously perceived as "low-priority" and "victimless", and ensure that prevention and proactive approaches can be prioritized in this area because the damage is far greater than previously thought.
The Netherlands has implemented policies that aim to improve the wellbeing of its citizens, supported by a wide range of wellbeing indicators that go beyond objective economic ones. Some key policy areas and indicators include:
Figure 11: Wellbeing Overview (Statistics Netherlands)
In terms of specific wellbeing indicators, the Netherlands, like the majority of OECD countries using a wellbeing approach, takes a number of factors into account. These include:
Life satisfaction is included as one of France's twelve New Wealth Indicators, with each indicator selected as part of a public consultation process. Under the 2015 legislation, the Ministry of State is then tasked with producing an annual report showing trends in each measure and what policy reforms affect the indicators, which is submitted to parliament.
Italy was the first OECD country to integrate the wellbeing framework into their budget process, with the introduction of a new law in 2016 that stipulates that wellbeing indicators should be included in a report prepared by the Ministry of Economy and Finance (DEF indicators) to be presented to both parliaments at the beginning of the annual budget cycle. DEF is then used to measure and predict policy implications for a range of outcomes.
In the labor market area, Slovenia has used the OECD's recommendation for subjective wellbeing valuation; equivalent income approach (subjective shadow pricing) based on the life satisfaction measure as a proxy for total utility, to evaluate the impact of various labor market policy reforms and the social losses and gains associated with them. Results of the policy evaluation showed that employment, i.e. having a job, was a stronger determinant of well-being than income, supporting the importance of employment for human well-being. The results also showed the importance of the impact of structural reforms related to the influence of households and housing on wellbeing. Although some policies, such as reduced business taxation or increased housing taxation, have a positive impact on GDP or the public budget, they have a negative impact on wellbeing, and this can be taken into account in the overall decision-making process for designing, deciding and implementing a policy or reform.
Ireland has published a series of working papers on the country's new multidimensional wellbeing framework (2nd report published in 2022, see Government of Ireland, 2022), outlining how the wellbeing framework can be used to inform policy making and budgeting processes in the future. In Ireland's approach, subjective wellbeing is one of many wellbeing domains and is not assigned a specific status or centrality.
Scotland, along with Iceland and New Zealand, is behind the Wellbeing Economy Governments (WeGo) initiative, which was launched in 2018. The project was inspired by the Wellbeing Economy Alliance (WeAll). Wellbeing Economy Governments (WEGo) is an initiative where member countries work together to understand the key priorities for a wellbeing economy. The group enables engagement, learning and collaboration across governments to use expert advice and deepen their understanding of delivering a wellbeing economy for citizens and the environment.
The group was formally launched at the OECD World Forum in South Korea in 2018. This included the participation of senior officials from the governments of Scotland, Iceland and New Zealand, along with Professor Joseph Stiglitz, a member of our former Council of Economic Advisers and Chair of the OECD High Level Group on Measuring Economic Performance and Social Progress.
Membership of the group has grown organically since its launch in 2018, and currently involves the governments of Scotland, Iceland, New Zealand, Wales and Finland, with Canada actively participating.
Goals
Policy Lab
Economic Policy Labs are a platform through which officials from respective governments can share experiences and expertise. They provide a forum for officials to engage in practical exchange on specific policy areas of common interest, in pursuit of improved wellbeing and prosperity for present and future generations.
New Zealand has been one of the leading countries in exploring wellbeing measures, and in 2019 they presented the world's first "wellbeing budget". This aims to improve not only economic indicators but also the wellbeing of citizens, including the use of life satisfaction measures and valuation methodology similar to the WELLBY methodology that the UK Green Book and Danish OSVB are based on. The New Zealand Ministry of Finance has developed tools and guides for Cost Benefit Analysis across government areas through the standardized CBAx Impacts Database and guidance documentation.
Australia is also one of the leading countries in the exploration, measurement and use of subjective wellbeing data, which is anchored in Australia's Institute of Health and Welfare. They have mapped various welfare indicators that include subjective wellbeing, as well as various determinants of wellbeing that include social connection, safety, social cohesion and environment.
In 2021, Australia's Institute of Health and Welfare Australia launched welfare 2021: data insights, which included data on subjective wellbeing. Among other things, they found that mental health had a higher impact on life satisfaction than physical health. The report shows that life satisfaction has been systematically measured since 2001 (see figure below), indicating that the subjective wellbeing approach has a prominent role in Australia's welfare policy. You can also download a freely available excel sheet with access to all wellbeing data.
In 2023, the Australian government launched Measuring what matters statementwhich is the starting point for the development of Australia's first national wellbeing framework. The framework contains 50 indicators that are monitored across 5 wellbeing themes: Healthy, Secure, Sustainable, Cohesive and Prosperous.
The Japanese Cabinet Office has established a council of relevant ministries and agencies working on the topic of multidimensional wellbeing to better coordinate their activities, including the development of key performance indicators for wellbeing initiatives. The Cabinet Office has developed a wellbeing dashboard in which subjective wellbeing plays a prominent role.
Following the events associated with the Arab Spring in 2010/2011, the UAE established a Ministry of Wellbeing and Happiness in 2016, whose purpose is to review and evaluate plans, programs and policies that ensure the UAE achieves more wellbeing and happiness in society.
The Quality of Life Framework in Canada is designed to measure "what matters most to Canadians" and to provide evidence-based quality of life indicators in budgeting and decision-making processes at a federal level. The life satisfaction measure and indicators for "one's life has a meaning" are used as cross-cutting indicators in the aforementioned wellbeing measurement framework. The framework is intended to show how public budgets affect "prosperity, health, environment, society and good governance". The development of the framework was led by the Department of Finance Canada and was developed in 2020/2021.
1: OECD "How's Life? 2020: Measuring Well-being", section 8
2: OECD (2023) "Measuring Well-being and Progress: Well-being Research"
3: Sundhedsministeriet (2017), "Den Nationale Sundhedsprofil", pp. 16-26
5: OECD (2023), Subjective Well-being Measurement: Current Practice and New Frontiers, p. 20.
6: OECD (2023), Subjective Well-being Measurement: Current Practice and New Frontiers, p. 19-20
7: Danish Business Authority (2022), CSRD and European sustainability standards
8: Deloitte & Impactly ESG impact roundtable (2023)
9: Regeringskanseliet (2012), Sweden, nya-matt-pa-valfard-and-quality-of-life-in-society (regjeringen.se)
12: Regeringskanseliet, Sweden, (2015), "Are we getting better? About measures of quality of life"
14: General Secretariat of the Council (2019): The Economy of Wellbeing Council Conclusions
15: McKinsey & Company (2020): "An experiment to inform universal basic income"
17: "Subjective Well-being Measurement: Current Practice and New Frontiers", p. 30D (OECD, 2023).
18: https://www.gov.uk/government/publications/the-magenta-book
20: https://www.gov.uk/government/publications/green-book-supplementary-guidance-wellbeing
21: Public Services (Social Value) Act 2012
22: Procurement Policy Note 06/20
23: HACT, UK Social Value Bank
25: Statistics Netherlands, CBS (2021), "Monitorof Well-being& the SustainableDevelopment Goals"
28: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers", p. 29-30.
29: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers", p. 29-30.
30: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers", p. 19-20.
31: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers", p. 30-31.
32: Wellbeing Economy Alliance, "For an economy in service of life"
33: Wellbeing Economy Alliance, "Wellbeing Economy Governments (WEGO)"
34: The 6th OECD World Forum (2018): "The Future of Well-being", Incheon, Korea
35: Scottish Government, Wellbeing Economy Goverments (WeGo)
36: The New Zealand Treasury, 2022/41
37: Australian government, "Australia's welfare 2021 data insights"
38: Australian Government (2023) "Measuring What Matters - Australia's First Wellbeing Framework"'
39: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers",p. 29-30
40: AUE Government "National Program for Happiness and Wellbeing".
41: Statistics Canada, "About the Quality of Life Framework for Canada"
42: OECD (2023), "Subjective Well-being Measurement: Current Practice and New Frontiers", pp. 18-20.
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