Wednesday 7 December 2016

Expect the Coalition to loosen the purse strings as they chase votes

Published 28/05/2015 | 02:30

When the IMF’s Ajai Chopra and the rest of the Troika turned up in Dublin in 2010 both worry and stress became more common than happiness and enjoyment
When the IMF’s Ajai Chopra and the rest of the Troika turned up in Dublin in 2010 both worry and stress became more common than happiness and enjoyment

It is often said that money doesn't buy happiness. Alas - and no matter how much one might wish it to be true - it simply isn't so. Money matters when it comes to contentment.

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Countless surveys the world over show that there is close connection between life satisfaction and income. Even more marked is the effect of losing money. Studies show that losing a given amount of money has a bigger negative effect on how you feel than the positive effect of gaining exactly the same amount (this is known in the jargon as "loss-aversion bias").

All this is to be seen in the world of work and remuneration. Economists have long known that wages are "sticky" to the downside. In other words, people are very hostile to a reduction in their cash remuneration. Employers know this, and in tough times they usually prefer to cut overall wage costs by laying off some employees rather than cutting all workers' pay.

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