The relationship between income inequality and happiness

It's the root cause of a lot of our problems

There are, obviously, a lot of variables that can help to explain the cultural, social and economic dynamic playing out in our country at this time. Some point to the “breakdown of the family”, a more secular society, globalization, social media as well as other phenomenon to help explain the malaise that seems to be permeating our nation (and many others as well).

It’s generally understood that when people feel happy (or content) they are less likely to commit violent acts, they tend to follow social norms and they are not threatened by other’s success (i.e., envy produces unhappiness). And it’s also well understood that income inequality produces more unhappiness.

The research is fascinating

In one study, researchers found that that Americans were on average happier in the years with less national income inequality than in the years with more national income inequality. They found that this phenomenon could be explained by perceived fairness and general trust. Put another way, Americans trusted other people less and perceived other people to be less fair in the years with more national income inequality than in the years with less national income inequality. They also found that the negative link between income inequality and the happiness of lower-income respondents was explained not by lower household income, but by perceived unfairness and lack of trust.

In another study, the researchers found that the relationship between income inequality and happiness was mainly affected by two competing psychological processes: jealousy and “signal” effects. The jealousy effect suggested that, when income inequality was high, individuals tended to be unhappy because they were jealous of their wealthier peers. In contrast, the signal effect posited that individuals might consider income inequality as a “signal” that social mobility was possible and, therefore, they might be more hopeful about their future prospects.

The researchers found that when income inequality was in the low range (i.e., it’s easier for individuals to climb the social ladder), then the “signal effect” was the main determinant and people were more hopeful about their future. However, when income inequality increased beyond a critical point, the top rungs of the social ladder became almost unreachable for most members of the society. As a result, individuals became less hopeful regarding upward mobility and, as the jealousy effect became the dominating factor, happiness decreased.

What this explains

As income inequality has risen in this country (and others) we find more anti-social behavior, tribalism and “othering” of individual groups. This fits quite neatly into the research which suggests that as income inequality rises, people become more jealous and less hopeful. As a result they blame others for their “lot in life” which fosters even greater anti-social behavior and othering. It’s a vicious cycle that can only be reversed by reductions in income inequality.

The bottom line

Income inequality may very well be the most predictive variable that explains much of our current national illness. Virtually everything that Trump is doing exacerbates this inequality and, thus, our happiness and our social cohesion.

Reversing this trend is how we get ourselves out of this mess.

“The lord of a state or a family, concerns himself not with scarcity but rather with uneven distribution… For where there is even distribution, there is no poverty.” - Confucius