Comparing Our Income With Others Makes Us Unhappy

People who compare their incomes with those of other people are less happy on average, especially if they compare with friends and family rather than with work colleagues. What””s more, the more that people think income comparisons are important, the more they favour income redistribution by the government.

These are among the findings of research by Andrew Clark and Claudia Senik, published in the May 2010 issue of the Economic Journal. The authors conclude:

””Man may well be a social animal. But constantly looking over one””s shoulder seems to make the world a less happy – and more unequal – place.””

The study, which analyses happiness data from across Europe, including the UK, finds that three-quarters of people think that it is important to compare their incomes with others. But such comparisons make people unhappy on average, and are particularly damaging for the poor. This is especially true for people who compare their incomes with those of their friends or family.

The researchers suggest that there is an ””information effect”” from our colleagues”” earnings: the more our co-workers earn, the better our future income prospects look. This is obviously less true of other non-professional groups, such as family members or friends. But all types of comparisons are associated with lower satisfaction.

People constantly take decisions and make evaluations taking account of the situation of others around them. This research presents new statistical evidence on the extent of income comparisons, the groups with whom individuals compare – and the effect of comparisons on life satisfaction and attitudes towards different government policies.

The authors find that:

  • Income comparisons are considered to be important by 75% of Europeans.
  • Income comparisons are not luxury goods. People in poorer countries compare their incomes more than people in richer countries, Within countries, poorer people are more likely to compare their incomes than are richer people.
  • There is no significant gender difference in the intensity of income comparisons.
  • Most people compare their incomes with those of their work colleagues.
  • People compare with those that they meet the most often. For example, the self-employed compare significantly less with their colleagues, but more with their friends; and people with children compare more with family members.
  • Those who compare more are less happy: the greater is the importance that people attach to comparisons, the lower they rank on different satisfaction scales, such as ””satisfaction with life as a whole””, subjective general health, ””feeling of depression during the past week””, as well as ””satisfaction with one””s standard of living””, ””satisfaction with job”” and feeling that one ””gets paid appropriately, considering efforts and achievements””.
  • Comparisons with work colleagues are most innocuous. All comparisons make people unhappy, but not equally so: comparisons with friends are twice as painful as comparisons with colleagues.
  • The more people consider income comparisons to be important, the more they are in favour of income redistribution by the government.

”’Who Compares to Whom? The Anatomy of Income Comparisons in Europe”” by Andrew Clark and Claudia Senik is published in the May 2010 issue of the Economic Journal.

Andrew Clark

Paris School of Economics | +33-43-13-63-29 | Andrew.Clark@ens.fr

Claudia Senik

Paris School of Economics | +33-43-13-63-12 | senik@pse.ens.fr