Measuring What Matters: How economic policy design can improve collective wellbeing
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Back in July, the government announced plans to introduce Australia’s first ‘wellbeing budget’. Headed by treasurer Jim Chalmers, the budget – due for release on 25 October 2022 – will not just focus on fiscal strategy, but will evaluate how the budget’s economic markers impact the wellbeing of Australian people – or as Chalmers puts it, “measuring what matters.”
Modelled off similar frameworks in New Zealand and Scotland, which analyse policy impacts across different dimensions of wellbeing, Chalmers’s budget will aim to improve policy design, evaluation and priority setting, as well as start a discussion about the future wellbeing of Australia by tracking standard of living and quality of life alongside GDP and other traditional measures of the economy.
In his address to the National Press Club back in April 2022, the (then shadow) treasurer gave a sense of what a future Labor budget might look like, outlining a five part plan that would not only boost economic growth, but would benefit workers, families and employers. This included:
- A Powering Australian policy to reduce energy costs and emissions as we transition to new sources of cleaner energy.
- Fee-free TAFE to address skills shortages.
- Cheaper, more accessible childcare to build a bigger workforce that is able to work and earn more.
- More modern infrastructure, including key investments in upgrading the NBN and the digital economy.
- A future made in Australia, made possible by smart co-investments in crucial sectors like manufacturing and the care economy and boosting the resilience of small business.
How is a wellbeing economy designed?
Around the world, governments are moving away from traditional markers of economic growth and embracing new metrics of progress, such as the wellbeing of people and the planet. While this is all well and good, it is no small feat.
To design an effective wellbeing policy, governments need to analyse deficits holistically so that solutions provide for collective progress. This involves understanding communities (and the cultural and socio-economic backgrounds of the persons within them), gathering evidence (through qualitative, statistical and participatory research), testing strategy (to encourage continuous learning and innovation) and then measuring how those policies support the overarching wellbeing vision, while simultaneously addressing economic concerns. This is a long-term and layered approach, not a quick-fix for federal overspend.
Suffice to say, bringing a successful wellbeing policy into effect is a huge undertaking. And the work doesn’t stop there. A (good) wellbeing economy requires perpetual maintenance and updates so that it remains contextual and reflective of the society it serves. To support this continual review, the wellbeing economy needs to be underpinned by robust policy that enables it to transcend its political parent and withstand changes of government.
“A Wellbeing Economy is not some fully fleshed out system waiting for adoption. The change we seek must be open, conditional, and iterative. A Wellbeing Economy must be driven by the people, according to their context and priorities…”
– Robert Pollock, Managing Director, Regional Development Solutions
How can economic policy design improve collective wellbeing?
It seems a no-brainer that a policy designed with the purpose of improving peoples’ lives would do just that. After all, who wouldn’t want more pay, less taxes, better education and a cleaner air-supply? However, when these ‘big ticket’ items are rattled off as being the focus of a new policy, governments are often met with scepticism as to how they are actually going to implement such ambitious change.
It is no secret that communities have grown cynical of governments’ intentions and abilities to act in their best interests. Time and time again, we see strategy that falls short of delivering outcomes (at best) or (at worst) fails to consider entire portions of the population altogether.
However, that is not to say that introducing a wellbeing budget is futile. If things like health, environment, education, cost of living and GDP are improved, people will be happier. It is how a wellbeing economy is implemented and measured that is key to whether it actually achieves its goals.
Looking to our international friends, we can gain valuable insight into how best to implement a wellbeing economy, as well as how placing happiness and wellbeing at the forefront of policy design can impact the collective.
Wellbeing Budget – New Zealand, 2019
In 2019, the Ardern-led Coalition Government introduced New Zealand’s first wellbeing budget. Departing dramatically from previous years, both in terms of budgetary process and funding priorities, the budget set out key areas on which the government should focus to improve the lives of New Zealanders. Those areas, selected via a collaborative and evidence-based approach using data from the Treasury’s Living Standards Framework Dashboard and the advice from sector experts and Government Science Advisors, were identified as being:
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- Taking Mental Health Seriously – Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds
- Improving Child Wellbeing – Reducing child poverty and improving child wellbeing, including addressing family violence
- Supporting Māori and Pasifika Aspirations – Lifting Māori and Pacific incomes, skills and opportunities
- Building a Productive Nation – Supporting a thriving nation in the digital age through innovation, social and economic opportunities
- Transforming the Economy – Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
The announcement of the first wellbeing budget was met with global fanfare. However, some four years (and wellbeing budgets) later, critics claim that Ardern’s budget fails to hold water.
According to a recent study, about one million Kiwi’s are actively considering moving offshore, citing the main reasons for leaving as being quality of life and cost of living. Similarly, food insecurity is an ongoing health issue, with “children and young people in sole-parent households as well as those receiving financial assistance” experiencing ongoing hardship when it comes to feeding themselves and their families. Another study found that 40 percent of 15 year olds in New Zealand are not achieving the most basic level of reading.
At face value, the results of New Zealand’s budget look poor. However, when you consider what the budget is trying to achieve – improving collective wellbeing via systemic change across a number of complex sectors – it is unreasonable to expect that measurable progress would be seen in just four years. Improving areas like cost of living, food shortages, child poverty and education requires long-term and sustained effort.
Ardern’s outlook and the ideals that underpin New Zealand’s wellbeing budget are admirable. However, it will be some time before we are able to properly assess its effectiveness and see real improvement. In other words: watch this space.
National Performance Framework and National Strategy for Economic Transformation – Scotland, 2007 and 2022
Though it was Ardern who received international acclaim in 2019, Scotland – a founding member of the Wellbeing Economy Governments – has actually had wellbeing measures in place for years. Introduced in 2007, Scotland’s National Performance Framework (NPF) evaluates how well the country is performing against a set of national outcomes and indicators. The markers include a range of economic, social and environmental factors aimed at measuring and improving wellbeing outcomes. Since its initial conception, which provided for a ten year vision measuring Scotland’s national wellbeing beyond GDP, the NPF has been updated to cover 11 outcomes, with 81 measures of improvement.
In 2022, Scotland introduced a separate strategy outlining how the government plans to deliver economic growth over the next decade. With its ultimate goal being to create a wellbeing economy by 2032, the National Strategy for Economic Transformation (NSET) sets out five policy programmes of actions: entrepreneurial people and culture, new market opportunities, productive businesses and regions, a skilled workforce, and a fairer and more equal society.
In terms of success of the NPF, as at September 2022, 34 indicators are performing at maintenance, while 16 are improving and 9 are worsening. Of note, economic growth is considered to be worsening (with the annual rate of change of GDP in Scotland in 2020 being -9.62%), while the amount of energy generated in Scotland by renewable sources is up (with 25.4% of energy being generated by renewable resources in 2020, compared to 7.6% in 2009).
According to the Transform our Economy Alliance, when it comes to the NSET, the results so far are disappointing and fail to align with the needs of the people or the planet. In their detailed assessment, the Alliance concludes that, “The disconnect between the priorities and ambition of the strategy and the scale of the challenges facing Scotland stems from a lack of an inclusive and wide-ranging participatory process for determining the strategy’s priorities.” Other organisations consider the strategy to be non-pragmatic, lacking in detail, and falling short of making any real, transformational change.
Gross National Happiness Index – Bhutan, 2008
In 1972, dissatisfied with traditional markers of development and unconvinced that GDP alone could deliver happiness and wellbeing to society, Bhutan’s teen monarch went in search of a pathway that could lead his people to a better life. After consultation with the community, His Majesty Jigme Singye Wangchuck discovered that even in extreme poverty, his citizens were proud of their spirituality, culture, community and relationship with the environment. And so, the concept behind Gross National Happiness (GNH) was born.
Since then, the idea of GNH has influenced Bhutan’s laws as well as its economic and social policies. In fact, upon parliamentary democracy in 2008, Bhutan’s first constitution ratified a duty to uphold GNH values. Now defined as “a holistic and sustainable approach to development which balances material and non-material values with the conviction that humans want to search for happiness,” the GNH’s aim is to achieve progress in all facets of life.
To determine Bhutan’s level of GNH, data is collected through citizen interviews and surveys. The information is then collated and measured against four key pillars: environmental conservation, good governance, sustainable and equitable socio-economic development, and preservation and promotion of culture. These are then broken down into nine domains: living standards, psychological wellbeing, health, time use, education, cultural diversity and resilience, good governance, community vitality, and ecological diversity and resilience. Each domain is chosen based on wellbeing research and is regularly measured via 33 indicators. A Gross National Happiness Index is developed from these domains and indicators.
The Oxford Policy and Human Development Initiative explains how the GNH supports policy-making within Bhutan:
Selection tools are used to review the potential effects of proposed policies on GNH and the results of the GNH index will be tracked over time to evaluate interventions. This ‘GNH Policy Lens’ requires that the policy consequences on all relevant dimensions be considered prior to implementation.
So, how does it measure up?
According to Bhutan’s most recent GNH Survey Report, life for the Butanese has improved. Between 2010 and 2015, Bhutanese happiness increased by 1.7% with “43.4% of Bhutanese being deeply or extensively happy and 91.2% enjoying sufficiency in at least 50% of the GNH domains.”
As a concept, it may seem that GNH is beyond reproach. However, those who look to Bhutan for policy guidance should do so with caution. The GNH has been met with significant criticism, with claims that its commitment to culture has been the cause of Bhutan’s history of discriminatory laws, racial intolerance and ethnic cleansing. From an economic perspective, Bhutan is still considered a poor country. Despite being at a record high, Bhutan has a GDP of only $2.32 billion. It also sits on the UN’s list of the least developed countries in the world (though it is expected to graduate from this status in 2023).
What can we learn from New Zealand, Scotland and Bhutan when it comes to designing economic policy for collective wellbeing?
- It is becoming necessary for governments to consider how policy impacts collective wellbeing or GNH.
- Wellbeing economies are more than just ‘high-level vision’ and need to contain detailed objectives and measurable outcomes.
- Measuring wellbeing or GNH requires careful, regular and comprehensive data collection, tracking and recording.
- Markers for wellbeing and happiness must be inclusive and representative of all persons within the community so as not to exclude or discriminate against minorities.
- If wellbeing is measured on a means basis or sliding scale, fringes of society and outliers are unlikely to be fully supported and catered for. It is important that governments realise that wellbeing looks different for everyone and consider the whole community when assessing the wellbeing of their countries.
- Governments should utilise tools like participatory research and policy testing to ensure that policy design can adequately address societal needs.
- Implementing a wellbeing budget is a long-term strategy, the results of which will not become apparent for many years – much longer than a government term.
- Policy needs to be contextual and reflective of the society it seeks to improve, not a stagnant framework for adoption.
