Does inequality make people unhappy?

by Martin Schröder

In every society, some have more income than others. In some societies, some have much more income than others. But are people that live in more equal societies happier with their life? The prevailing view is that income inequality breeds unhappiness.

But does someone from Sweden really wake up in the morning to thank god that she does not live in a country with more inequality? Probably not… Indeed, empirical studies that compare whether countries with more inequality have a happier population showed mixed results. Some found that indeed, countries with more inequality have a more satisfied population. But others found the opposite: countries with more inequality actually have a MORE satisfied population. Go figure.

I think that the problem of existing studies is that they compare countries. They can show whether a country that is more equal than another country also has a happier population. But this is not how it works. We do not compare our inequality to some other country, we compare what we experience now to how what we have come used to from our own country. Using data from the World Values Survey, the British Household Panel Study, the Australian panel study of Household Income and Labour Dynamics, the Korean Labor and Income Panel, the Russian Longitudinal Monitoring study, the Swiss Household Panel and the German Socio-Economic Panel, I can indeed show that people are less satisfied when inequality in their own country is higher than it used to be. But they are not more satisfied when they live in a country with less inequality than another country. The article just appeared in the Journal of Happiness Studies: