Income inequality and happiness inequality: a tale of two trends

The General Social Survey (GSS) in the US is a survey administered to a nationally representative sample of about 1,500 respondents each year since 1972 and is an important source of information on long-run trends of self-reported life satisfaction in the country.1 As such, it is a key indicator of happiness in the US.

Using this source, Stevenson and Wolfers (2008)2 show that while average happiness in the US has remained broadly constant, inequality in happiness has fallen substantially in recent decades.

The authors further note that this is true both when we think about inequality in terms of the dispersion of answers, and also when we think about inequality in terms of gaps between demographic groups. They note that two-thirds of the black-white happiness gap has been eroded (although today white Americans remain happier on average, even after controlling for differences in education and income), and the gender happiness gap has disappeared entirely (women used to be slightly happier than men, but they are becoming less happy, and today there is no statistical difference once we control for other characteristics).3

Curiously, these reductions in ‘happiness inequality’ have taken place alongside growing income inequality. As the following chart shows, income inequality in the US is exceptionally high and has been on the rise in the last four decades, with incomes for the median household growing much more slowly than incomes for the top 10%. (More on this data in our entry on incomes across the income distribution.)

The results from Stevenson and Wolfers for the US are consistent with other studies looking at changes in happiness inequality (or life satisfaction inequality) in different countries. In particular, researchers have noted that there is a correlation between economic growth and reductions in happiness inequality—even when income inequality is increasing at the same time. The visualization below, from Clark, Fleche, and Senik (2015)4 shows this. It plots the evolution of happiness inequality within a selection of rich countries that experienced uninterrupted GDP growth.

In this chart, happiness inequality is measured by the dispersion—specifically the standard deviation—of answers in the World Value Survey. As we can see, there is a broad negative trend; happiness inequality is falling in countries where GDP per capita is rising. And the opposite is also true: in their paper, the authors show that happiness inequality is increasing in those countries and times when GDP is falling.

So, how could it be that happiness inequality falls with rising income inequality?

Clark, Fleche, and Senik argue that part of the reason is that the growth of national income allows for the greater provision of public goods, which in turn tighten the distribution of subjective well-being. This can still be consistent with growing income inequality, since public goods such as better health affect incomes and well-being differently.

Another possibility is that economic growth and social change in rich countries has translated into a more diverse society in terms of cultural expressions (e.g. through the emergence of alternative lifestyles), which has allowed people to converge in happiness even if they diverge in incomes, tastes and consumption. Steven Quartz and Annette Asp explain this hypothesis in a New York Times article, discussing evidence from experimental psychology.