Do You Want to be Rich... or Just Richer than Everyone You Know?

The relationship between wealth and happiness is complicated, and is often bound up in our habit of comparing ourselves to those around us.

2022-05-09

Would you rather earn $50,000 a year, or $100,000?

It sounds like a dumb question. You’d take the bigger salary, right?

But… there’s a catch. (Isn’t there always?)

If you opt for $100k, everyone else gets paid $200k. But if you accept the $50k paycheck, you’ll be the highest paid person around… no one else will earn more than $25,000.

You don’t need to be an economist to know that $100k buys more than $50k – in pure monetary terms the higher figure is more attractive… but humans don’t always think like that. 

When researchers Sara Solnick and David Hemenway posed this hypothetical question to participants at Harvard a surprising number opted for the lower $50,000 salary. More than half the people were willing to take less money just to be RICHER than their peers. 

More than half!

If there’s one thing that studying the science of wellbeing has taught me, it’s that we humans put huge emphasis on how we’re doing relative to those around us. 

This intuition that our happiness depends on comparisons with those directly around us is reflected in a new research paper about the effects of inequality on our wellbeing. 

Dr David Bartram studies life satisfaction at the University of Leicester and is the co-editor of the Journal of Happiness Studies. He looked at happiness data from across the globe dating back to 1981 – and tested whether happiness levels in different countries has changed as the inequality gap has grown or narrowed in each society. 

Bartram found that in nations where the gulf between the rich and poor had closed, the people tended to say they were generally happier than they were 40 years ago. But in countries where inequality remained high or got worse, people tended to show lower levels of wellbeing.

Bartram found that in his own country – the UK – happiness levels haven’t changed much since 1981 - a year in which Britons were suffering from an awful economic recession and millions of people were out of work.

That might seem surprising, but Bartram thinks that growing inequality has played a role. “In wealthy countries increased inequality has a substantial negative impact on life satisfaction,” he says. 

It seems that rich people don’t become all that much happier even as they get relatively richer - no matter how much extra wealth they accumulate (We’ll look at this next time – subscribe HERE so you don’t miss the article). But even though rich people get no benefit from being relatively richer, the poor definitely experience a hit for being relatively poorer. 

“People who earn little really suffer from falling further behind - they feel excluded and frustrated by not being able to keep up even with people who receive average incomes."

You may be saying: “Of course? Being poor sucks, and it negatively affects your happiness!” 

You’d be partly right – struggling financially and not being able to meet your basic needs is tremendously stressful and research shows it does cause considerable emotional suffering. 

But being poor while others around you prosper especially sucks for our wellbeing. 

Let’s take the case of unemployment. When Andrew Clark, a professor at the Paris School for Economics, studied well-being in the UK across different kinds of labor markets he found that, as you might expect, losing your job negatively impacts your happiness. 

But how big that effect was depended on where you lived. Being unemployed in a town where lots of folks are unemployed doesn’t feel as bad as being unemployed in a place where everyone else has a job. 

So… I’ll ask again. Which do you think would make you happier? A salary of $100k when your peers get $200k? Or only $50k, but still double what everyone else earns?

It's not such an easy question after all. 

Stay well and stay happy,

Laurie

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