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New analysis from ONS shows that both household income and spending matter to personal well-being, but spending has a greater effect on how we feel about our lives. The analysis looked at how household income and spending affect personal well-being, after taking many other possible influences on well-being into account.

How much does household income matter to personal well-being?

The findings show that as household income rises, life satisfaction and happiness also rise, and anxiety levels fall.  Although household income clearly matters to personal well-being, circumstances like being unemployed compared to being in employment matter more.

The analysis also looked at whether personal well-being is affected by the source of household income, particularly the proportion of household income from state cash benefits such as Housing Benefit or Jobseeker’s Allowance. It also considered whether there are different effects of this on the personal well-being of men and women.

For men, the proportion of household income derived from cash benefits has a strong relationship with all four aspects of personal well-being, even when controlling for the amount of household income. As the proportion of household income coming from cash benefits rises, men’s life satisfaction, sense of what they do in life and happiness all fall and anxiety rises.

The strength of this relationship was smaller for women than for men. There were particularly large differences between men and women in the strength of the relationship between the proportion of income coming from cash benefits and happiness and a sense that what they do in life is worthwhile.

How does the well-being of those in the highest income group compare to those in the lowest?

There is a gap in the personal well-being of those in the richest and poorest households after taking other possible influences on well-being into account. For example, life satisfaction is lower among those in the poorest 20% of households than among those in the richest 20%. The differences are similar in size to the differences in life satisfaction reported by married people compared to those who are single.

On average, as income rises, the largest increases in well-being are among those in the lower income groups. This suggests that differences in household income at lower levels of income have a greater effect on well-being than differences at higher levels.

How much does household spending matter to personal well-being?

The findings show household spending matters more to many aspects of personal well-being than household income.  As household spending rises, average ratings of life satisfaction, the sense that what one does in life is worthwhile and happiness also rise. Unlike household income, the level of household spending was not significantly related to anxiety.  This may be because spending is the means by which we acquire not only necessities but also the extras which add to enjoyment of life, while income is more related to a sense of financial security.