Analysed: Why Nordic Countries Top the Wellbeing Charts

Commentary by Jabir Dhalla

On March 20th 2024, the annual World Happiness Report was released, and data revealed that, in line with previous trends, Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) all ranked in the top ten countries globally.

It is difficult to pinpoint which element has solely led to the Nordic’s high scores in the World Happiness Report. Rather, there is no specific formula for happiness, but it depends on the interplay between the factors mentioned above and their interaction with the demographic present in the wider population. However, the Nordic nations can be seen as good models for countries in similar stages of development, demonstrating how to maximise life satisfaction for citizens whilst maintaining economic stability and sustainability. As such, governments should consider the strategies that Nordic countries have employed when devising policy, to maximise this evermore important measure of happiness within their own borders.

Many economists have argued that the Nordic countries’ high government expenditure has been responsible for its happiness levels. Such expenditure would typically be on underprovided, non-rivalrous and non-excludable public goods, as well as on policies to encourage the production of goods with positive externalities and deter the production of goods with negative externalities. Such welfare spending is likely to boost quality of life for citizens, and consequently happiness.

However, government expenditure cannot be solely responsible for high happiness levels. Comparing the Nordic average government expenditure with that of the rest of Europe or the G7, spending has been roughly the same, yet the rest of Europe and the G7 are far below the Nordic in happiness rankings.
One such factor is inequality. Based on the Gini Coefficient, which expresses the difference in incomes relative to the mean income of a country on a scale of zero (complete equality) to one (complete equality), the Nordic countries fall in the top half of Europe with low income inequality compared to the rest of the continent.

Nordic countries are in the top half of Europe with some of the most even income distributions in the continent. Such low income inequality levels can lead to less social unrest and more equality in society, contributing to higher happiness levels, and may be one of the reasons why the Nordic region ranks highly on this metric.

Denmark: “A Haven for Happiness”

Kammesh Atputhajeyam

Ranked as the 5th most happy place to live in for those under 30 and topping the charts as the happiest place to live in for those over 60, Denmark has undeniably cemented itself as a cultivator of happiness. Averaging the scores of the two age groups, the Danish population evaluates their happiness at 7.6225 out of 10. It is important to recognise that happiness is an overarching term that takes into account economic factors like income; social factors like health and freedom; and environmental factors, like pollution.

Denmark had a low unemployment rate of 2.5% in February 2024. It can be argued that the high occupational mobility in Denmark’s labour market, with the average job duration at 8 months (OECD, 2008), allows workers to match their skills and personal goals to their job, maximising happiness.

Happiness can be fostered through implementing a positive work culture as well as striking a
clear work-life balance. The “hygge” principle is entrenched within Danish society: the act of sparking a sense of contentment through creating a comfortable atmosphere. At a micro-level, this can quash tensions in the workplace and so cut delays in the production process.

At a macro-level, promoting leisure time can help boost the recreational industries, diversifying the Danish economy. It is evident that to achieve economic sustainability, social cohesion should be harmonised between economic agents.

Though there is a theoretical causation effect from happiness to productivity gains, the trend in reverse is less transparent. Rising productivity may be achieved through working longer hours, which can cause burnout and neglect towards social aspects of happiness like family ties and time for hobbies. In the long run, this level of productivity would be unsustainable, thus causing a destabilisation in personal happiness as well as contracting potential growth.

Governments around the world should follow Denmark’s precedent to prioritise happiness and social welfare. A top income tax bracket of 50% results in high government revenue, which can be effectively spent on physical infrastructure and social safety nets. This diminishes income inequality, protecting the most vulnerable groups of society. Effective government spending can be used to subsidise childcare and support transport infrastructure to ensure high connectivity between places to improve geographical mobility. However, superficial government policies can only have a limited effect on happiness. Cooperation and trust between firms, workers, and consumers can cause happiness to be ingrained within the fundamental system of society.

What makes Finland such a prosperous social and economic nation?

Sadie Shanley

To mark the UN’s International Day of Happiness, on 20th March, the findings of the 2024 World Happiness Report were published and it has, once again, been revealed that Finland continues to hold the top position for the seventh consecutive year, with a score of 7.741.

The economic theory that happier workers are more productive has been widely accepted; however, it is difficult to isolate the causal effect of increased productivity, which many believe to be happiness, due to the significant lack of solid data. Jon Clifton, the CEO of Gallup (a global analytics firm), said that the World Happiness Report attempts to ‘bridge
some of these gaps by offering insights into people’s perceptions of life on Earth’.

Petri Bockerman and Pekki Ilmakunnas conducted the Job Satisfaction Productivity Nexus, a study using matched survey and register data; the authors utilised Finnish data to examine the correlation between job satisfaction and firms’ productivity. Their estimates for the effect of a one point increase in the average level of employees’ job satisfaction on the firms’ productivity (on a scale of 1 to 6) were all positive, no matter the specification of the model used, therefore consistent with the argument that happiness does, in fact, have an impact on personal and economic productivity. However, despite job satisfaction being a useful measure of happiness, it is a narrower measure of overall well-being as it is only related to happiness within the workplace.

Another study exploring the relationship between happiness and personal and economic productivity was coordinated by Oxford University’s Saïd Business School. Using a straightforward email survey with five different emoji buttons that represented different levels of happiness, employees were asked to rate their state of happiness once a week. The researchers concluded that workers are 13% more productive when happy, with Professor De Neve even stating that ‘[employees] work faster by making more calls per hour worked and, importantly, convert more calls to sales’. On a deeper evaluation, which involved looking at psychological laboratory evidence, it was proposed that this positive link might have resulted from the fact that being in a positive mood tends to result in workers thinking in ways that are more flexible (Isen and Daubman 1984) and efficient (Isen and Means, 1983). Finally, this study concluded that happy workers are simply more productive during their workdays – they do not work more hours than their unhappy colleagues.

The pivotal role of the Finnish government in providing has been emphasized by Castells and Himanen (2003) in their book on the Finnish informational model. Finland has long had a strong emphasis on the value of schooling to its entire population, especially its educators; education is seen as a superior investment, and many believe that their remarkable social and economic success is the result of this. And, despite Finnish children spending fewer hours at school than pupils in other OECD countries, they still continued to score higher in the PISA studies in reading, science and mathematics, which is consistent with the aforementioned findings from the studies above, which argued a happier nation would be more productive, both personally and economically.

Alongside this, Finnish schools are relatively effective in reducing the differences that arise from the status of the parents, illustrated by Finland’s income inequality between the richest and the poorest being the smallest of N. Brooks and T. Hwong’s sample (they looked at ninety economic and social indicators for twenty countries). We may also attribute this statistic to Finland’s fiscal policy, since its system of progressive taxes and universal social security has led to the redistribution of incomes and poverty alleviation.

For these reasons, Finland is a model country. A focus on the access of knowledge, information and socially-necessary services, in addition to the acquisition of goods, is the key to explain why Finland is ranked higher than other nations in the World Happiness Report.