On 4 July, we hosted a webinar on ‘Reframing Social Value’. A critical part of social value is using evidence to inform decision-making, and Wellbeing Valuation is one of the key approaches to measurement. But what is it?
Wellbeing Valuation involves measuring the impact of an outcome by its effect on subjective wellbeing. This methodology represents the latest developments in the valuation of outcomes that are not openly traded on the market and therefore do not have an explicit value. For social outcomes –things which are difficult to measure in economic terms – the Wellbeing Valuation method can be particularly effective. For example, wellbeing evidence helps identify the needs of those living in a particular area, which in turn can help to inform policy options and, ultimately, investment decisions.
Critically, Wellbeing Valuation is what is referred to as ‘Green Book compliant’ – it is one of the recommended valuation methods as set out in HM Treasury’s Green Book 2022 and in the Green Book Supplementary Guide on wellbeing analysis in appraisal. The Green Book provides advice on how to evaluate policies and programmes.
At Simetrica-Jacobs, we have been an integral part of the development of wellbeing methodologies for appraisal in the UK, having been involved in the 2011 Green Book update on valuation methodologies, as well as in the 2022 Green Book refresh. Our research has also taken a central and important role in the new recommendations set out in the Green Book Supplementary Guidance on Wellbeing.
A recommended approach to applying the Wellbeing Valuation approach is set out within the Green Book. In particular, the guidance develops the concept of “wellbeing adjusted life years” (also called WELLBYs), with a WELLBY corresponding to the monetised value of a one-point change in life satisfaction (on a scale from 0 to 10), per person per year (HM Treasury, 2021).
As outlined in Figure 1, we estimate the impact of the outcome of interest on wellbeing. Then, we calculate the amount of additional income that an individual would need to experience the equivalent change in wellbeing. Since wellbeing values are based on how individuals actually experience a good, Wellbeing Valuation can help widen the range of additional drivers that can be incorporated into economic analysis, with a wide array of applications in policy- and decision-making.
Figure 1. Wellbeing Valuation Methodology
How have we developed the methodology?
Over the last decade, we've applied Wellbeing Valuation across a range of sectors and industries, and in our work with our partners. Have a look at the evolution of Wellbeing Valuation in the timeline below:
How can Wellbeing Valuation be used?
Wellbeing Valuation is applicable across a wide range of outcomes (from employment and sport-related activities through to health-related outcomes and even impacts around housing and the built environment). The approach is practical, agile and flexible, whilst retaining the rigour and reliability of a Green Book-compliant methodology.
1. Quantifying specific impacts
Simetrica-Jacobs was commissioned by the Department for Culture, Media and Sport (DCMS) to estimate the costs of loneliness in the UK. The wellbeing costs of loneliness were estimated via Wellbeing Valuation, and the resulting wellbeing costs were added to estimates of the costs of loneliness on health and productivity established in the literature.
The effect of loneliness on wellbeing was estimated using data from the Community Life Survey and corroborated with data from Understanding Society.
We estimated that deteriorating social connections – an increase in the frequency of feeling lonely from ‘hardly ever’ to‘ occasionally’ – is associated with a 0.7 drop in life satisfaction points(measured on a 0-10 scale). This impact was valued at £9,537.
The report includes guidance for using estimates of the costs of loneliness in cost-benefit analyses of interventions aimed at tackling loneliness. The findings of the project were incorporated into a Wellbeing Valuation Annex to HM Treasury’s Green Book.
2. Incorporation into Cost Benefit Analysis
Simetrica-Jacobs was commissioned by the Canal and River Trust to develop a cost benefit analysis of its towpath Street Art intervention and assess its value for money.
The cost benefit analysis included an application of Wellbeing Valuation. The effect of visiting street art and/or public art on wellbeing was estimated using data from Understanding Society. We estimated an overall wellbeing benefit of £11.79 per Street Art visit. Overall, the Street Art initiative had a positive net present value (based on the data and evidence available) over a three-year horizon and the potential to deliver good value for money.
The findings from analysis were used to identify the key benefits from the Street Art initiative as well as validate support for the initiative across different stakeholders.
3. Understanding the effect on wellbeing to inform decision-making and the public
Being a victim of a scam has a financial impact, however there is also a non-financial impact. In 2021, consumer watchdog Which? commissioned Simetrica-Jacobs to assess the impact that being scammed has on one’s wellbeing.
The effect of being a victim of fraud on wellbeing was estimated using data from the Crime Survey for England and Wales. This large-sample repeated cross-sectional data set asks respondents about their experience of crime in the past year, their satisfaction with their life and a host of socio-demographic factors. This allowed us to use the Wellbeing Valuation approach.
We found that being scammed was associated with a 0.168-unit decrease in a victim’s life satisfaction and that they would require £2,509 of extra income in 2021, on average, to have a level of life satisfaction equivalent to what would be expected had they not been scammed. This is similar in magnitude to the impact on wellbeing of being threatened. You can read a summary here and also access the full report.
The findings from this analysis were presented to MPs on the Draft Online Safety Bill Joint Committee to help lobby for a more extensive Bill. They also received wide coverage in the media, with Which? and the BBC applying the research to 3.7 million fraud incidents that were reported in 2019-2020. Aggregated, the figures demonstrate a negative wellbeing impact of £9.3 billion in one year. This report was used to inform the public on the negative impacts (beyond the financial impact)of being scammed.
Want to learn more, or work out how to integrate Wellbeing Valuation into your decision-making? Book a 1-1 with our Chief Economist, Ed Dallas, today: email@example.com
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