The Happiest Countries in the World

The residents of Switzerland are the most satisfied with their lives, according to the latest Better Life Index report, released this week by the Organization for Economic Co-operation and Development (OECD). Switzerland has moved up to the top spot, bumping Denmark to fifth. For the third year, the United States failed to make the top 10, while countries like Canada, Mexico and all the Scandinavian nations did.

The Better Life Index rates the 36 OECD countries in 11 areas that aim to cover every aspect of life, including income, education, health, work-life balance and life satisfaction. 24/7 Wall St. reviewed the Better Life Index and ranked the countries based on the life satisfaction measure alone.

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While each of the other 10 categories of quality of life measured in the study is related to life satisfaction, there are several that clearly play a much bigger role, Conal Smith, section head within the statistics directorate at the OECD, explained in an interview with 24/7 Wall St.

The first, and arguably the most important, is jobs. Of the 10 countries with the highest levels of reported life satisfaction, eight had among the 10 highest employment rate — that is, the percentage of the population that is employed. Of the 10 countries with the lowest reported levels of life satisfaction, six had unemployment rates in excess of 11% in 2012. This includes countries like Greece, Portugal and Italy.

“For life satisfaction, it is pretty clear that unemployment drives the relationship,” explained Smith. “Not having a job when you’re willing and able to work affects life satisfaction more than anything else.”

Not surprisingly, good health appears to affect life satisfaction. In seven of the 10 countries, there was a better-than-average proportion of residents reporting good health. This includes Canada, where 88% of respondents reported being in good or better health, compared to an OECD average of 69%. Life expectancy was also high in most these countries, with Switzerland reporting an average life expectancy of 82.8 years, the highest among the 36 countries measured. Of the 10 countries with the worst life satisfaction, the majority had below-average life expectancy.

Another factor many of the countries on this list have in common is governments that tend to provide ample benefits for residents. Five of these countries, including Sweden, Denmark and Austria, spend more than the United States as a percentage of gross domestic product (GDP) on their residents. Likely as a result, income equality is also very high in the majority of these countries.

Dropping three spots this year, the United States is tied for 14th in life satisfaction. This is in spite of the fact that the it had the highest disposable income of any country measured and a high rate of self-reported good health. Given how well the country does on most measures, it suggests that life satisfaction encompasses more than simply income or even health. Mexico, which had among the lowest scores for many indices, still reported among the highest life satisfaction.

Earlier this week, the OECD released “How’s Life?” — a further review of the quality of life data compiled for the Better Life Index. As part of its analysis, the OECD looked at other components affecting the quality of life, including disparities in quality of life and life satisfaction among women, what happened to these countries during the recession, and the treatment of their workforces.

Romina Boarini, head of the well-being and progress section at OECD, said one of the goals of the new report was to identify inequalities among different groups, including women. Boarini explained, “Where the gender disparities are the lowest, you actually observe that the overall well-being is the highest. There seems to be that correlation that where gender disparity is lower and a higher level of overall well-being.”

Another component of the new “How’s Life?” study was the long-term expectations of residents of these countries. The report measured how optimistic people were about their subjective quality of life in five years from 2012, and compared it to how optimistic they were in 2005. While most of the happiest countries in the world are slightly more pessimistic now than they were in 2005, they are generally much less pessimistic than most of the countries measured by the OECD. In Denmark and the Netherlands, residents are actually more optimistic about their quality of life than they were in 2005.

Based on figures published by the OECD as part of its annual Better Life Index, 24/7 Wall St. reviewed the 3o indices measured for each of the member nations and participating countries. The indices that make up the Better Life Index are comprised of 11 categories: housing, income, jobs, community, education, the environment, civic engagement, health, life satisfaction, safety and work-life balance. Figures used to calculate the index and its components are from different years, and the values for individual nations represent the most current data available. We relied on unemployment rates from the OECD’s most-recent Economic Outlook data release, as well as figures covering government outlays and the Gini coefficient, which measures income equality after taxes and transfer payments for each country. In the “How’s Life” report, new data included changes in poverty rates between 2007 and 2012, changes in total employment in the 2007-2009 and 2009-2012 periods. Includes also were the proportion of all tertiary degrees awarded to women in 2010 and the differences between men and women in overall life satisfaction for 2012. The OECD also included unemployment insurance gross replacement rates as of 2011.

These are the happiest countries in the world.

10. Mexico
> Life satisfaction score: 7.3
> Self-reported good health: 66% (14th lowest)
> Employees working long hours: 28.6% (3rd highest)
> Disposable income: $12,732 (3rd lowest)
> Life expectancy: 74.2 years

Mexico received a high life satisfaction score despite receiving low scores in a number of categories that make up the OECD’s Better Life Index. No nation rated worse than Mexico in safety — the nation’s murder rate of 23.7 murders per 100,000 residents in 2011 was the highest of any OECD nation and more than 10 times the OECD average that year. Additionally, 13.1% of residents had been assaulted or mugged in 2012, also the highest of any nation considered. Mexico also ranked as one of the worst nations for both work-life balance and income. The nation had one of the lowest averages for household disposable income in the OECD, at just $12,732 as of 2010. This is less than a third of the average disposable income in the United States. However, none of these factors have prevented Mexicans from being satisfied with their lives. The continued economic and social problems have resulted in increasing pessimism in Mexico. No country measured by the OECD had a bigger drop in projected long-term well-being than Mexico between 2005 and 2012.

9. Finland
> Life satisfaction score: 7.4 (tied for 7th highest)
> Self-reported good health: 69% (18th highest)
> Employees working long hours: 3.9% (8th lowest)
> Disposable income: $25,739 (13th highest)
> Life expectancy: 80.6 years

People in Finland spent an average of 19.6 years getting an education, more than any other country in the OECD. Based on students’ average scores in reading, mathematics and science, Finland was considered to have the most accomplished students. The government, relative to the nation’s size, is one of the largest spenders in the developed world, providing a significant social welfare system. In 2012, the government’s total spending was equal to nearly 56% of GDP. Finland’s employment rate of 69% in 2011, although lower than quite a few other countries, was higher than the 66% average rate across all OECD countries. People in Finland worked just 1,684 hours annually, compared to 1,776 hours in all OECD countries. Just under 4% of all employees worked very long hours, compared to about 9% in all OECD countries. Women who worked full-time earned just over 80% of men’s wages, a wider gap than any of the happiest countries. However, women in the country actually averaged a higher level of life satisfaction than men.

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8. Canada
> Life satisfaction score: 7.4 (tied for 7th highest)
> Self-reported good health: 88% (3rd highest)
> Employees working long hours: 3.9% (9th lowest)
> Disposable income: $28,194 (9th highest)
> Life expectancy: 81 years

Canada was rated among the top nations for residents’ good health. In 2011, 88% of residents surveyed reported they were in good health, higher than all countries except for the United States and New Zealand. Canada also had one of the higher average household disposable incomes among nations considered, at more than $28,000. This was well above the OECD average of $23,047. Canada was rated as one of the best nations in the OECD for housing — although there are some concerns in the country that a real estate bubble is forming. Like many of the countries with the highest life satisfaction, Canada’s poverty rate actually declined slightly during the recession.

7. Austria
> Life satisfaction score: 7.4 (tied for 7th highest)
> Self-reported good health: 69% (18th highest)
> Employees working long hours: 8.8% (14th highest)
> Disposable income: $28,852 (6th highest)
> Life expectancy: 81.1 years

Last year, just 4.7% of all workers in Austria were unemployed, less than any other nation in the eurozone, where the 2012 unemployment rate was 12.3%. As many as 72% of Austrians between the ages of 15 and 64 were employed in 2011, among the top 10 of all countries and better than the 66% average rate for OECD countries. Austria was in the top third of all countries in terms of both household financial net worth, at $47,458, and personal earnings for full-time employees, at $43,688. In addition, 96% of all residents indicated that the water quality was satisfactory, higher than all but two other countries and significantly better than the 87% who indicated that across all OECD countries. Austria also has high levels of civic participation — the voter turnout rate was 82% in 2008, the ninth highest among countries considered. Unlike many of the happiest countries, Austria had a high level of earnings volatility in the past few years, with more than a quarter of the population experiencing an earnings increase of 20% or more, while a similar number of people saw a decrease of 20% or more.

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6. Netherlands
> Life satisfaction score: 7.5 (tied for 5th highest)
> Self-reported good health: 76% (11th highest)
> Employees working long hours: 0.7% (2nd lowest)
> Disposable income: $25,493 (14th highest)
> Life expectancy: 81.3 years

The Netherlands was rated as one of the best countries for jobs by the OECD. In 2011, 73% of the population between 15 and 64 years old was employed, one of the highest proportions of all nation’s measured. Further, only roughly 1.5% of workers were unemployed for more than one year as of 2011, less than half the OECD average of 3.1%. Also, potentially contributing to residents’ happiness is the fact that 94% of residents said they had a support network they could count on for help if they were in trouble. This was one of the highest figures among countries measured. The Netherlands has one of the most generous unemployment insurance systems among countries measured by the OECD. The government replaces 75% of lost wages during the first phase of unemployment, the third highest replacement rate among the countries measured by the OECD.

5. Denmark
> Life satisfaction score: 7.5 (tied for 5th highest)
> Self-reported good health: 70% (17th highest)
> Employees working long hours: 2.0% (4th lowest)
> Disposable income: $24,682 (15th highest)
> Life expectancy: 79.9 years (12th lowest)

Employees in Denmark had an average full-time gross pay of $45,802, higher than all but four
other countries in the OECD. The average worker in Denmark put in just 1,522 hours annually, much lower than the OECD average of 1,776 hours. Air quality and water quality was considerably better in Denmark, compared to many other countries. Some 94% of residents indicated satisfaction with the water quality, the seventh highest of all countries and better than the 84% indicated across the OECD. The government of Denmark spends considerably to ensure the general well-being of its residents. Last year, government spending totaled 59.5% of GDP, the most of any OECD nation. The country also had the best work environment of any European nation, with more than 60% of workers reporting less severe job demands, but good available resources to complete their daily tasks. Unlike most of the countries considered by the OECd, Denmark actually became more optimistic, despite the recession.

4. Sweden
> Life satisfaction score: 7.6 (tied for 3rd highest)
> Self-reported good health: 80% (8th highest)
> Employees working long hours: 1.2% (3rd lowest)
> Disposable income: $26,242 (12th highest)
> Life expectancy: 81.9 years

According to the OECD, Sweden ranks as the top country among all nations measured in terms of protecting its environment. Swedes enjoy some of the highest quality air of any nation — as of 2009, there were just 10 micrograms of small particulate matter per cubic meter in the country’s most populous areas. Its water quality in 2012 also ranked among the highest for all countries. The nation’s residents also are among the healthiest of any nations measured. Nearly 80% of those surveyed in 2011 stated they were in good health, well above the 69% average for the OECD. Although Sweden received moderate ratings for income and jobs, it was one of Europe’s best nations for income equality, with one of the lowest Gini index scores of any country. Women working full-time earned about 14.8% less than men, which was only slightly better than the average across countries measured by the OECD. However, an estimated 63.7% of all college degrees were granted to women, one of the highest rates among countries measured.

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3. Iceland
> Life satisfaction score: 7.6 (tied for 3rd highest)
> Self-reported good health: 77% (9th highest)
> Employees working long hours: 13.5% (8th highest)
> Disposable income: $21,201 (16th lowest)
> Life expectancy: 82.4 years

Iceland residents have the strongest support networks of all countries — 98% of residents indicated they could count on friends or relatives if they needed help. Iceland residents tend to be in good health, as well, with the country’s life expectancy and self-reported health both among the top 10 of all countries. The employment rate for those between the ages of 15 and 64 was 79%, tied with Switzerland for the highest among all countries. Where Iceland did not do as well was regarding income and wealth — average disposable household income of $21,201 and average household net financial wealth of $31,182 were both lower than OECD averages. But after accounting for taxes and transfer payments, income in Iceland was more evenly distributed among residents than in other nation in the OECD. Unlike many of the happiest countries in the world, Iceland’s economy was hit relatively hard by the recession. The poverty rate increased by close to 2%, compared to an OECD-wide 0.5% increase. Employment between 2009 and 2011 declined by 3.4%.

2. Norway
> Life satisfaction score: 7.7
> Self-reported good health: 73% (14th highest)
> Employees working long hours: 2.8% (6th lowest)
> Disposable income: $31,459 (3rd highest)
> Life expectancy: 81.4 years

Norway’s employment rate for those between ages 15 and 64 was 75%, tied with the Netherlands for the third highest rate among all countries. The gross pay of full-time employees neared $44,000, the ninth highest of all OECD countries. The average household income was $31,459, higher than every country except for the United States and Luxembourg. People in Norway tend to work significantly less than those in other countries — the average worker only put in 1,426 hours of work, compared to 1,776 in all OECD countries. Less than 3% of the country’s employees worked very long hours, lower than all but five other countries. In 2012, just 3.3% of all workers were unemployed, well less than all but one other nation examined by the OECD, South Korea. As many as 96% of the country’s residents were satisfied with the water quality, tied for third highest in the OECD. Norway also ranked among the 10 best countries in terms of air quality. Norway had one of the smallest gender wage gaps in the world: Women working full-time earned just 7.8% less than men.

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1. Switzerland
> Life satisfaction score: 7.8
> Self-reported good health: 81% (7th highest)
> Employees working long hours: 5.9% (17th lowest)
> Disposable income: $30,060 (4th highest)
> Life expectancy: 82.8 years

In no other country did residents have a better sense of well-being than in Switzerland. People in the country tend to be better off financially than residents of most other countries. In 2010, the average household’s disposable income was $30,060, higher than all but three other countries. Meanwhile, the average household financial net worth in Switzerland was more than $99,000, higher than any other country except for the United States. As many as 79% of the country’s residents were employed in 2011, tied for the highest employment rate in the OECD. People in the country work just 1,632 hours annually, compared to the OECD average of 1,776. Very few residents were unemployed in 2012, when the unemployment rate was just 4.4%, lower than all but three other nations studied. During the recession, Switzerland had among the strongest job growth among any country measured by the OECD. Employment grew by 4.1% between 2007 and 2009, and by 2.7% between 2009 and 2011. While, in the OECD as a whole, employment grew by 0.5% and 0.1%, respectively, during that time.