Economic indicators, like GDP per capita, are commonly used as indicators of welfare. However,
they have a very limited and narrow scope, excluding many potentially important welfare
determinants, such as health, relative income and religion – not surprising since they were not
originally designed to fill this role. There is thus growing acceptance, and use of, subjective measures
of well-being, (called ‘happiness’ or ‘life satisfaction, often used interchangeably) both worldwide
and in South Africa. Happiness economics does not propose to replace income based measures of
well-being, but rather attempts to complement them with broader measures, which can be important
in making policy decisions that optimise societal welfare. This paper tests for differences in subjective
well-being between race groups in South Africa, and investigates the determinants of self-rated life
satisfaction for each group. Using the 2008 National Income Dynamics Study (NIDS) data,
descriptive methods (ANOVA) and an ordered probit model are applied. Results indicate that
reported life satisfaction differs substantially among race groups, with black South Africans being the
least satisfied group despite changes since the advent of democracy in 1994. Higher levels of
educational attainment increase satisfaction for the whole sample, and women are generally less
satisfied than men (particularly black women). As found in many other studies, unemployed people
have lower levels of life satisfaction than the employed, even when controlling for income and relative
income. The determinants of life satisfaction are also different for each race group: White South
Africans attach greater importance to physical health, whereas employment status and absolute
income matter greatly for black people. For coloured people and black people, positional status (as
measured by relative income) is an important determinant of well-being, with religious involvement
significantly contributing to the well-being of Indian people.