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By The Numbers

Income inequality and the pursuit of un-happiness

John Ketchum Nov 5, 2013
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It’s no secret that income and wealth are key parts of a person’s happiness. Most people want to have the financial resources at their fingertips to provide for basic needs and pursue other goals at the same time.

The Organization for Economic Co-operation and Development (OECD)  released its “How’s Life?” study today where it measured the happiness of 33 member countries. The least happy countries on that list included Turkey, Greece and Chile. (Remember, these are some of the most developed countries in the world, so the list isn’t comprehensive.)

As part of the study, the OECD looked at the income equality of the 33 countries surveyed. The top 10 countries with the greatest income disparity are: 

  1. Chile
  2. Mexico
  3. The Russian Federation
  4. Turkey
  5. United States
  6. Israel
  7. Portugal
  8. Spain
  9. Greece
  10. Japan

See a trend here? Three of the most unhappy countries are also on the list of the most unequal.

Dan Ariely is a behavioral economist at Duke University. He says it’s not just inequality itself that impacts happiness. It’s the perception of inequality.  That is, what people feel they should have compared to those around them.

“If you’re surrounded by people who have a lot and you don’t, it’s very hard for it not to stare you in the face, and to both make you feel that this is something you want, but at the same time being unable to get that,” said Ariely.

A study called “Income Inequality and Happiness” conducted in 2011 found that people tend to be happier when there is more equality.  The authors highlighted a couple points on why this may be true.

– First, many people (especially low- and middle-income earners) are likely to perceive the world to be unfair only if “the rich get richer.” It is possible, then, that people will perceive less fairness in the years with greater income disparity, and this perception in turn could lower those individuals’ overall happiness in such years.

-Second, income disparity could disjoint and divide community members (Putnam, 2000), and as a result, it could make people trust others less (Ichida et al., 2009). Tot he extent that trust is positively associated with happiness( Inglehart, 1999), lowered general trust could explain why people are in general less happy in times of income inequality. 

Shige Oishi is a professor at the University of Virginia and is one of the authors of the study.  He says while income inequality may impact the happiness of lower- to middle-income earners, those at the top of the income ladder seem to be less affected.

“In a time of inequality, many of the top earners do not feel unfairness, whereas most people do.  The top earners tend to think that they deserve all the money they earned,” said Oishi.

We took the conversation to Twitter to see what you thought about the topic.  Here’s what you told us:

 

 

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