A new study finds that we resent prosperous peers more in places with big wealth gaps—an effect that’s especially strong among low-income groups.
Lots of factors influence our happiness, and like it or not, behavioral scientists consistently find that money is one of them. But it’s not just our own money that impacts our well-being; the money those around us make matters, too. In one telling study from 1998, a majority of participants said they’d rather make $50,000 and have others bring in half that than make $100,000 and have others take home double. The Joneses do exist, and we kinda hate them.
A new study suggests our prosperous peers bother us even more in places with higher income inequality—an effect that’s especially strong among the poor.
In what they call the “largest investigation of relative income” to date, psychologists Felix Cheung and Richard Lucas of Michigan State University analyzed the self-reported income and life satisfaction of more than 1.7 million Americans, as gathered by Center for Disease Control and Prevention surveys from 2005 to 2010. Cheung and Lucas then paired this data with Census-based measures of county income (as a proxy for what the Joneses bring in) as well as income inequality.
Here’s a closer look at their major findings, as reported in an upcoming issue of Journal of Personality and Social Psychology.
Money does matter—both ours and theirs
In line with previous research, Cheung and Lucas found a statistically significant relationship between higher household income and higher life satisfaction. Broadly speaking, the more money people had, the more satisfied they felt.
The researchers then controlled for household income and looked at county income, to see how much the Joneses mattered. Quite a lot, it seems. Household income aside, county income was negatively related to life satisfaction. In other words, as the income of those around us went up, personal well-being went down.
Cheung and Lucas put a price tag on this degree of social comparison, and found it’s a pretty steep one. People in richer counties—defined by the study as those with county incomes one standard deviation above average—need to make $4,400 more a year to match the life satisfaction of those in poorer counties.
Income inequality makes things worse…
Things got even worse when the researchers added income inequality into the mix. In counties with higher income inequality, the negative relationship between county income and life satisfaction was even stronger. If we resent the Joneses in general, we resent them even more in places where the distribution of wealth is especially unequal.
Cheung and Lucas tallied up the cost of the impact, too. Take, for instance, people in the sample with an average household income, roughly $41,500. Living in a richer county led to lower life satisfaction via social comparison, but if that place also had low income inequality, people only needed to make about $1,000 to compensate for the dip in well-being. But if that place had high income inequality, the price of social comparison soared to $7,700 a year.
This type of analysis can’t say for sure why income inequality has such a strong impact on social comparison. Their best guess is that people in places with large wealth gaps simply have money on their mind more often; indeed, people in these places do show a stronger tendency to Google luxury items. So income inequality perpetuates the culture of upward comparison that tends to leave us less satisfied with our own lot.
Especially if you’re poor
Little surprise that these relationships were “more pronounced” for the poor, according to Cheung and Lucas. In richer counties with higher income inequality, people with low household incomes (roughly $17,800) had to earn almost 30 percent more to match the life satisfaction of their peers in poorer counties. Simply put, it’s tough to be poor, but it’s psychologically tougher to be poor in places where others are rich.
Cheung and Lucas conclude:
In a country where income inequality is high, economic growth may only benefit the well-being of a small group of wealthy individuals through absolute income, but decrease the well-being of poorer individuals through social comparison of income, thus resulting in a net null effect of economic growth.
The research can’t say for sure that wealth gaps and social comparison are causing the changes in life satisfaction. One way to get at that question would be to follow certain individuals over many years (and, ideally, over many moves) and see how their well-being varied with income and place. But given its huge sample size the new work does make a strong case for the negative impact of income inequality, especially among the poor—adding yet more urgency to an already urgent problem.