contributed by Nathan Gehring CFP®
Sure, every financial decision a person makes has an economic impact on that person. And we can do quite a good job at projecting what the potential economic impact might be in the future. But I find myself personally fascinated by the non-economic impacts of financial decisions. I believe that considering these non-economic impacts is as important as considering the economic ones when making financial decisions.
Recently, I’ve been reviewing dozens of research papers that explore just such questions. One research paper I read suggested that high parental support for children to attend college has been shown to reduce GPA. Another showed the connection between carrying debt and an increased incidence of depression.
So I thought I’d chase down research looking at the non-economic impact of deciding to immigrate to another country (as many of our clients do). And a real dandy of a research paper surfaced, one that explored the impact on subjective (self-reported) happiness of people choosing to immigrate.
An interesting study released May 2011 by John Gibson, David McKenzie and Steven Stillman titled Miserable Migrants? Natural Experiment Evidence on International Migration and Subjective Well-Being suggests that international migration has both positive and negative impact, which runs counter to much research completed previously on this topic.
According to the paper, prior studies have generally suggested that international migration creates negative impact on subjective well-being despite often resulting in positive impact on “material” (financial) well-being. There are a variety of theories on why this occurs. The most compelling include the likelihood that unhappy people are more likely to migrate in the first place and the potential that once they have migrated, people’s aspirations increase in the new country and so that they feel equally unattainable as their former aspirations in the previous country. This creates frustration.
Good and Less Good
This new research brings into question the conclusion that migration results in lower subjective well-being. The research suggests that migration has powerful positive benefits, and some impact that is more difficult to decipher.
One effect suggested by the study is significantly improved mental health for migrants, particularly when viewed beyond the short-term. The impact on happiness was less clear, with results on happiness fluctuating over time. Interestingly, migrants self-report increased welfare and respect received by others, but experimental results show no increase in welfare and actually a slight reduction in respect.
Immigration and Happiness
I find this research quite interesting. Not surprisingly, the impact on subjective well-being of international migration is, well, kind of subjective. The impact is a bit unclear. Certainly significantly improved mental health is a great benefit, particularly when tied with improved financial well-being. Yet other impacts seem a bit uncertain. Are people happier after migrating or not? The results are unclear. People seem to “feel” more respected, but experiments show that not to be the case.
Does immigration improve happiness? Ultimately, that will be a question only your own experience can answer. While these types of studies can show us trends and themes among large groups of people, every individual experience will be different. You do not live an “average” life, but a very unique life driven by unique motivations, experiences and challenges.
However, this study goes a long way toward illustrating that international migration is not quite the negative decision many previous studies have painted. In fact, in many ways the decision could be very positive both from a financial perspective and from subjective well-being.
As I help people make financial decisions, I am increasingly relying on this type of research to offer them some insight into the possible non-financial impact of financial decisions. While the financial impacts are certainly very important, the non-financial impacts are often equally important. I want my clients to consider a variety of impacts of their financial decision and I hope you will consider them in your financial decisions in the future.