Demographic and socio-psychological effects in judging the minimal and ideal standard of living

DOI:

Our review primarily focuses on what factors determine our ideas on the standard of living and satisfaction. In this way demographical factors are given special attention together with heuristics and socio-psychological impacts. The “theoretical background” presents these concepts. In the quantitative research we measured that the ideas and expectations for the standard of living in the future – let it be the minimum or the desirable maximum – are significantly influenced not only by the demographical features but also the socio-psychological characteristics and identity of the individual. The primary objective of our research was to draw attention to the fact when people are interviewed about their ideas and desires of making a living, it is important to consider the actual living standard, identity and some demographic factors.

• II.    Literature review presenting the theoretical background

Several attempts have been made so far to measure and assess the idealized living standard and explore the correlations. In the following part a short summary is written about the most important results.

• II.1.    Standard of living, satisfaction and demographical characteristics.

According to a definition in an encyclopaedia, standard of living is the extent and degree of (economic, cultural) existence, different income and consumption of society or community [28]. Contradictory findings were revealed on the correlation of age and standard of living in the international literature. As some author states age and quality of living are not correlated, i.e. the degree of happiness and satisfaction is the same for the young, the middle-aged and the elderly [4; 6; 35]. However, there also are some results according to which age and quality of living make a U-shape, i.e. the young and the elderly are more satisfied than the middle-aged [2; 13; 14]. According to Diener [3] the young find more pleasures in life but the elderly try to make a more positive picture of that. The reason of the author for this is that as they are getting old, the elderly become wiser and more adaptable to their environment created. The researches directed at the linear relationship between quality of life and age concluded both positive and negative results. Horley and Lavery Argyle [18], for example, found a positive correlation while Sheldon et al [30] experienced that this positive correlation lasts till the age of 50 and afterwards it cannot be shown. The same results were gained by the 2014 research of KSH (Hungarian Statistical Office) in Hungary according to which the young adults are more satisfied but this lasts till the age of 45–54 and afterwards, it is significantly reduced. Interestingly enough, women of 16–64 are more satisfied. Other researches detected a negative correlation between age and subjective well-being [24; 27]. Koo et al [24], however, stress that the reduction of well-being with the passing of age is only occasional like in the case of low educational level, lack of partners or bad health status.

According to the research of Kopp and Martos [25] in Hungary the changes in subjective well-being are not linearly related to economic growth, i.e. it is not absolutely true that economic development results in well-being for the society. If economic activity is analysed we can state that those working full-time are the most satisfied with their living standards and it especially holds true for the entrepreneurs. Students have the highest level of satisfaction of those without a job. The research also highlights that the least satisfied are the unemployed as it is not only an economic problem, but it also negatively affects that psychical and mental state of the individual. In terms of health status there is an existing difference between its subjective and objective assessment. Subjective health status is connected to assessing the standard of life [23]. The empirical data of Utasi [34] justified that the social network embracing the individuals, the solidarity of social connections and the source of love from relationships enhance happiness and satisfaction. Furthermore, he also showed that happy people have twice as many friends as the unhappy ones. Lengyel and Janky [26] also proved that of the social connections lack of friends is a very likely source of unhappiness. However, further examination of this topic is beyond the scope of the study. (Judit Gébert [15] provides an excellent summary of the theoretical bases and problems of measuring well-being).

Recently research has been carried out by the EU on the poverty threshold of the member states. The research of the 26 states that also included a focus group examination was trying to create such social indicators alongside which the social situation of the European countries could be well comparable. These social indicators signal how much certain minimally expected and satisfactory goods and service baskets cost in different countries and whether the citizens can afford to buy them. This goods and service basket was termed as reference budget. (It shows the minimum income with which the individual can fulfil its social roles and can lead a healthy way of life). Minimal satisfactory condition was the level with which a “decent” and entire social life can be lived, i.e. running an economic household and taking part in society as a full member. The latter one means that man can fulfil their different social roles such as being a parent, relative, colleague or neighbour. A good parent, for example (also in an economic sense of the word), must be able to raise their children properly by ensuring a safe childhood for them to become self-confident adults. Another example is that in order to become a good friend, one must invest in going out with friends or inviting them. So as to fulfil our different social roles properly, a minimum income level must be ensured [31].

Altogether 75 focus group examinations were carried out in 25 member states with healthy respondents aged between 30 and 50 living in the capital from different social and economic background. The baskets were prepared for four hypothetical household types: 1) a couple with two children; 2) a single parent with two children; 3) a single woman and 4) a single man (people in a good health status living in the capital city). Before the focus group interviews experts created the different parts of the entire budget. For instance, dieticians worked out a basket for healthy food and their ingredients. The basic principle was that by using these baskets one can lead a healthy way of life from a minimal budget and also the individuals and families concerned must be economically able to have a healthy diet and earn the necessary money to buy it. The researchers set the price for the selected food and necessary ingredients. The baskets created can also be interpreted like a kind of shopping list. These baskets were debated at the focus group interviews whose main topic was how people identify the parts (goods / services) that are necessary to fulfil different social roles. Furthermore, they also define how much a family (e.g. in Budapest) needs for the abovementioned things [19].

The basic idea of our research derives from this qualitative research. We suppose that the social and economic situation of the focus group respondents had a significant impact on the issue of what “minimally acceptable” and “affordable” is. Accordingly, the consumer baskets created and priced this way do not necessarily reflect what the required and inevitable minimum standard of living in the given society is. (It was one of the most important objectives of the research of the EU). We assume that in addition to the factors presented (age / gender / employment etc.) income and identity are also decisive in what is regarded to be “ideal”, “acceptable”, “tolerable” etc. It is essential to consider not only the characteristics mentioned above but also the mechanisms that distort thinking and influence judgment by making problems especially simpler and instead of logics, subjective feelings and unique framing dominate. The following part reviews them.

• II.2.    Heuristics and social-psychological impacts.

Heuristics. The research of Tversky and Kahneman prove that in their forecasts people do not usually follow the rules of expected utilities and the statistical rules behind the forecasts [33]. Instead, some basic heuristics are applied in their judgments. These heuristics are such mental processes or shortcuts that make problems simpler in a complicated and risky decision situation – and instead of logics, subjective feelings, prejudices and rules of thumb dominate [20–23]. As a result of the theories and experience of the authors and their followers prospect theory emerged that identifies the decision making patterns that differ from the rational and the behaviour based on rational expectations. One of the most important findings of Kahneman and Tversky is connected to interpreting frameworks that was termed as framing or packaging. The packaging or framing effect means that the method of transferring information has a decisive impact on individual decision making in uncertain situations. As such, the differences in the amount of information, the method of describing the problem or the number of options that are offered to decision makers determine how the individual frames the problem, and what decision is going to be made.

There are several subtypes of the framing effect identified but our paper deals only with availability bias as we think in the case of living standards; it is the framing that has a social distortion. (It is one of the three heuristics). According to availability bias people systematically overestimate unusual, spectacular and experienced events when making decisions. Another decisive factor of the subjective significance of things and events is also connected. How frequent an event is in our judgment depends on how easily it can be recalled from our memory. The frequent events are easy to evoke and the phenomena that make a greater impact on us are assigned a greater frequency that the neutral, indifferent ones [17]. The standard of living is likely to determine our ideas for the future, what present / past economic difficulties our environment has to cope with and also what information we have on our opportunities.

Of course, other distorting psychological impacts on creating the desirable / possible standard of living prevail, as well. Only three of them are analysed now; the urge of social comparison, face consciousness and identity are outlined.

Social comparison . People usually give a higher importance to their wealth and they are happier if they see they are in a better situation than others (this is also called “relative income hypothesis”). So not only how much we earn counts but also how much we earn in relation to the others. For example, it is also important to know how high our income is relative to the national average. The higher it exceeds the average, the more satisfied we are expected to be with our standard of living. Of course, the happiness level of our salary does not only depend on it. It also counts how much our colleagues, neighbours, relatives earn (or, at least, how much we think the people we like comparing ourselves with earn). Most people create a rank order from this aspect and the higher they place themselves, the happier they are and the higher their self-assessment is. Moreover, their comparison with the others and the subjective rank order is in a tighter correlation with / a more likely forecast of happiness level than the amount of income.

Face consciousness. The research of Xin-an Zhang and Shanghai Jiao Tong [36] proved that the people who continuously compare themselves with others are unhappier. According to their findings the impact of money on well-being primarily depends on how high people’s need to meet the others’ expectation is (using their terminology, “face consciousness”). What does it mean in real? From one side, the social standing of an individual within a society, from the other side, a kind of longing for looking good for the others. If face consciousness is high, the person deals a lot with his social appearance to be pleasant by trying to keep, enhance and protect their own image. Face consciousness can derive from two sources: personality traits that can lead to special results and things to show to the others such as health and wealth. Social comparison and face consciousness are somehow related.

That is why luxury goods play a special role in developing economies that signal the position in the competition. Those with high face consciousness rather regularly check on their position in the rank order and appreciate money more. If they have it, their subjective well-being is also enhanced. On the other hand, such people have little money; they become much unhappier than the others with the same amount of money but want to meet the others’ expectation to a smaller extent. In general, we think if we had a little more money, we would be happier, but this does not necessarily hold true. When we reach a higher level, we are actually happier but afterwards a newer and higher level of needs appears in our lives due to habituation and the urge of social comparison. That is why in general we can say that the more money we have, the more we want.

Identity is a multidisciplinary notion prevalent not only in psychology, sociology but also in economics as a moderating factor of economic processes. There are several types of identity such as ethnic, national, linguistic, religious, gender, class identity etc. Our paper primarily deals with social identity as we think this has made an impact on the standard of living and the desired quality of life. Social identity can be linked to Erving Goffman which can be defined as follows. The expected behaviour is not only influenced by social roles but also the selection of personal values such as honesty, beauty etc. The most important issue is what identities and structure of identities the person concerned regards valid for themselves [32]. Doyal and Gough [5] set the objective of freedom of all types of oppression and rendition and its conditions are sought from the point of view of satisfying needs. They regard health and autonomy as basic needs. They suppose that physical and mental health is the most basic human requirement, whose satisfaction is individual interest. The other group of basic needs can be linked to identity or autonomy. They define it as the basic need for creative knowledge, the skill of drafting objectives and strategies necessary for reaching the targets theoretically [5].

E.H. Erikson [7–11] dealt with the formation of identity who states that the formation of identity takes place at the end of the young age by when the previously gained skills become active and can play their proper social role. Berger and Luckmann [1] states that in the primary socialising process individual identity is activated by conveying a certain slice of the objective reality, and afterwards it is very difficult to modify. It was also examined from other aspects to associate social definition to it: “identity produced by the mixture of organisation, individual consciousness and social structure that reacts to the current structure by preserving, changing or renewing it. …types of identity are relatively stable parts of objective reality although they are social products (and the degree of their stability does, of course, depend on society” [1].

In order to play a role in society in line with our identity, the influencing factors of the individual together with some institutional, physical, cultural and economic circumstances. Proper social inclusion and participation is necessary for the different social positions to be available. From the research carried out by the University of Antwerp and financed by the European Commission – in which the reference budget was analysed in Europe – several different social roles were stated of which the role of women is listed below. The categories are as follows: mother; student; manager of their own enterprise / company; housewife; member of an association / organisation (e.g. business, sport, in relation to gender identity etc.); independent woman; wife; citizen; friend.

These social positions were created in line with official social requirements and the international directives of EU member states. When creating categories social expectations and indispensable dire human needs were also considered [31], our paper also uses this classification.

Based on the correlations and our experience drafted above the following hypotheses were formulated.

H1: With becoming older the expectations toward the standard of living also increase while it decreases when approaching retirement age.

H2: Those living in the capital associate higher amounts with creating “very tight” and “very good” standard of living than those living in the countryside.

H3: Those with a stronger female identity, due to their figure, associate lower amounts with “very tight” and “very good” standard of living than those whose primary identity is determined by others.

H4: As the number of those in the household grows, the judgment on how much is necessary for a tight budget per person decreases.

H5: As the number of those in the household grows, the judgment on how much is necessary for a very good budget per person decreases.

• III.    Presenting the sample and methodology

  Participation in the research was voluntary. Online questionnaires were used that were filled in by 195 women in March 2017. The questionnaire consisted of several question types such as simple choice, matrix, ranking order and short answers to a

picture. The questionnaire was focused on topics based on the results of the Antwerp research but here only the results in connection with the living standards are presented. The results were evaluated by using SPSS programme.

We were interested to know how social environment and identity, in addition to the well-known demographical impacts, influence the individual’s judgment on how much they need for a “very tight”, “modest”, “average”, “good” and “very good” standard of living. The underlying concept was that the concept of how much a household needs is greatly influenced by the number of persons who live in the household, how much they earn and what their identity category is like. In our opinion these factors determine the cognitive distortions that derive from representative heuristics, i.e. the perception of how great their needs are.

The following responses were given to the question “How many people live in the household?” 1) one (25);

• 2)    two people (69);

• 3)    four people (35).

According to our findings as the number of those in the household grows, the judgment on how much is necessary per person decreases. While singles marked 125.000 Ft as the necessary amount of the household with a very tight budget, those living in a four-people household indicated 54.000 Ft per person to the same question. In general, a single indicated 483.000 Ft as the necessary income for the household for a very good standard of living while those living in a four-people household replied with 150.000 Ft per person to the same question. So, a single indicated approximately double the amounts as the necessary money per person in a household compared with a four-member family when it comes to a tight budget. At the same time, however, if we allow imagination of the standard of living fly, singles mark more than three times the amount than another living with three more. In our opinion the reason for this can be that the fantasy of a man without family ties (no responsibility for the others, less used to managing money on an everyday basis, e.g. should not only consider themselves when dividing the income by the expenses) is less restricted in terms of money, as well. While those living in a family are used to limitations, sharing time between work, life and other tasks and, as a result, have more restricted minds concerning money matters. Of course, in the background there is a rational reason according to which a single has to cover all the household expenses, these are divided among the members of the household. It is especially important in households where rents make up a high percentage of the income.

Our previous hypothesis according to which barriers, limitations and responsibilities determine how tight or very good standard of living one can imagine represents what differences may occur between the responses of singles and those living with a partner. Singles indicated significantly higher amounts than those living with a partner. The previous group stated 96.000 Ft for a tight budget while they indicated the net amount of 334.000 Ft for a very good budget. The amounts indicated by those living with a partner (companion or spouse) are 69.000 Ft and 211.000 Ft, respectively. The difference between the answers for a tight budget is 27.000 Ft (Sig. 0.001) while the general difference of a very good budget is 123.000 Ft (Sig. 0.000).

Interesting correlations could be found between identity and prospects for standard of living (lower and upper limits). Due to its complexity, the question on identity was properly answered by 70 so such a few items could be relied on in the case of hypotheses on identity. Finally, the 10 identity categories were divided into two bigger groups: “female roles” (mother, housewife, wife) and “other” (student, citizen, sibling, friend, independent, manager, member of an association, organisation) identity groups. Regarding the most typical answers of the identity categories, the order is the following. The most frequently marked identity category was “mother” followed by “independent woman” and “friend” at the third place (altogether 7).

Afterwards we examined whether there was a difference between “female roles” and “other” in terms of their estimates how much their household would need to make a very tight / modest / average / good / very good living. We expected that due to their figures, the group with a stronger female identity would mark lower amounts than the other group. According to our findings lower amounts were indicated by the respondents with female identity than the non-female ones in the case of all standards of living. In the case of a very tight budget the average of those with a female identity was 147.000 Ft while the others indicated 171.000 Ft. The average for a good standard of living was 498.000 Ft and 540.000 Ft, respectively. The reason for this is that in most households it is the women who manage money and they are “closer to the ground” in the case of a minimum amount and the possible opportunities, as well. In contrast, the press release of KSH reported the average net salary to be 182.100 Ft on average in January 2017 (KSH Gyorstájékoztató, 2017). However, it is important to know there is a significant difference between the average salaries of those living in the capital and in the countryside. The previous ones earn 50 % more on the average than people in the countryside so, of course, the way of thinking about the possible salary / standard of living also differs for these two groups.

So, identity determines framing reality and opportunities (how we interpret events and opportunities etc.). It is also important to note what other perception differences exist between female and non-female identity groups in the economic issues concerned. First, let us see whether there is a salary difference between female and non-female identity groups and second, whether they differ in terms of their financial attitude. It was analysed by means of a money attitude scale, i.e. MAS by Roberts and Sepulveda [29]. Based on the net salary per person there is no significant difference but the tendency of the non-female identity group’s higher net salary per month prevails. Female and nonfemale identity groups showed a smaller difference in financial attitudes when examined by higher categories. But if we look at the items of these categories, there are significant differences. In the case of the items “I regularly bargain hunt” (Sig. 0.008), “I am typically worried when it comes to money” (Sig. 0.039); “I often automatically think to myself I cannot afford even if it is not true” (Sig. 0.007) those with female identity would rather significantly agree with the previous statements. It

Table 1

Relationship between living standard and household size

(Estimate how much your household would need (Ft / person) to make a very tight / modest / average / good / very good living?)

„How many people live in the household?”	Very tight living (Sig. 0,000)	Average living (Sig. 0,000)	Very good living (Sig. 0,000)
One	125 000	225 000	483 000
two people	78 000	133 000	255 000
four people	54 000	83 000	150 000

Note. Own research. Statistical method: Analysis of Variance.

can be concluded that anxiety and being worried about financial matters are present in our lives. And this can also explain why lower amounts were indicated for questions on the standard of living.

Demographical data. After these correlations were surfaced we were interested to know how the determination of thinking this way (judgment made by “with some limitations” or without by the individual) appears in relation to other demographical characteristics such as age, residence and marital status. The most significant differences appear in terms of age. Four age groups were made: 18–25, 26–35, 36–50 and above 50. The same tendency can be noticed in all standard of living categories. There is a monotonous increase in the first three categories while the estimates of the average salaries for the standard of living decrease in the last category. In the case of a “very tight” standard of living it is 137.000, 184.000, 205.000 and 152.000 (Sig. 0.008), respectively; for a very good standard of living the average is 445.000, 543.000, 626.000 and 520.000 (Sig. 0.006). It can be seen that while getting old and approaching the retirement age limit the needs, expectations and prospects increase while they decrease above 50.

In the case of residence we examined if there was an impact on living in the capital on what amounts the respondents thought to be necessary to have a “very tight” and “very good” standard of living. The average responses of those living in the settlements of Pest county or in Budapest are significantly higher than those living in the countryside. Obviously, the people living at a higher standard of living think in other perspectives than those living under different circumstances. This is also proved by the following numbers. In Budapest and Pest county 59 of 100 respondents said that they had a monthly salary of 150.000 Ft per person (59 %) while 52 of 91 indicated an income below 150.000 Ft (57 %). The difference is significant (Sig. 0.018).

Income. According to our findings those in the highest income category (more than 250.000 Ft monthly salary per person) significantly differ from those in low income categories (less than 150.000 Ft monthly salary per person) regarding the fact how much money per month they would need to make a “very tight / very good” living. Those with a higher income indicated significantly higher amounts. The average of the “very tight” category was 84.000 Ft while the one in the “very good” category was 282.000 Ft. In contrast, those with a lower income indicated the “very tight” standard in 73.000 Ft and the “very good” in 228.000 Ft on the average. Those with the highest salary (above 350.000 Ft) indicated their net amount requirement for a “very tight” standard in 222.500 Ft and the “very good” one in 734.000 Ft.

• IV.    Conclusion

To sum up, we can state that the ideas and expectations for the standard of living in the future – let it be the minimum or the desirable maximum – are significantly influenced not only by the demographical features but also the socio-psychological characteristics

Table 2

Relationship between living standard and age

(Estimate how much your household would need (Ft / person) to make a very tight / modest / average /good / very good living?)

Indicators	Very tight living (Sig. 0,008)	Average living (Sig. 0,002)	Very good living (Sig. 0,006)
18–25 year	137 000	230 000	445 000
26–35 year	184 000	280 000	543 000
36–50 year	205 000	336 000	626 000
above 50 year	152 000	268 000	520 000

Note. Own research. Statistical method: Analysis of Variance.

Table 3

Relationship between income and residency

Indicators	Under 150 000 Ft	Above 150 000 Ft	Total
Budapest and Pest county	41 fő (41 %)	59 fő (59 %)	100 fő
Countryside	52 fő (57 %)	39 fő (43 %)	91 fő

Note. Own research. Statistical method: Chi-Square Test (Sig. 0.018).

and identity of the individual. However, these factors are strongly correlated. The number of people in the household, residence and income naturally determine the individual’s frame of thinking, so their cognitive heuristics and influence identity, as well. Our research has obviously justified previous results, i.e. with growing old and approaching retirement age needs, expectations and prospects increase while they decrease close to 50. The primary objective of our research was to draw attention to the fact when people are interviewed about their ideas and desires of making a living, it is important to consider the factors that we also examined.