Income Status and Life Satisfaction.

The importance of both income rank and relative income, as indicators of status, has long been recognised in the literature on life satisfaction and happiness. Recently, several authors have made explicit comparisons of the relative importance of these two measures of income status, and concluded that rank dominates to the extent that reference income becomes insignificant in regressions including both these explanatory variables, and that even absolute or household income, otherwise always positively related to happiness, may lose statistical significance. Here we test this hypothesis with a large UK panel (British Household Panel Survey and Understanding Society) for 1996-2017, split by age and retirement status, and find, contrary to previous results, that rank, household income and reference income are all usually important explanatory variables, but with significant differences between subgroups. This finding holds when rank is in its often-used relative form, and also with absolute rank.

Income rank and depressive symptoms among employees in Germany - A 5-year cross-lagged panel analysis.

Background/Objective: Socioeconomic disparities in mental health are well-established. Previous research suggests that relative income rank is associated with depressive symptoms above and beyond absolute income. This study aimed to investigate the predictive value of income rank for future depressive symptoms while accounting for absolute income. Exploring potential reverse pathways from depressive symptoms to income rank was a secondary objective. Method: A two-wave cross-lagged panel design with a 5-year follow-up was used to analyze data for income rank, absolute income, and two dimensions of depressive symptoms (i.e., cognitive-affective and somatic symptoms) from initially 4,201 employees. Income rank was calculated for reference groups, based on the same gender, the same 5-year age band, and the same occupational skill level. Results: Lower income rank at baseline predicted a higher severity of cognitive-affective depressive symptoms at five-year follow-up, even after adjusting for absolute income. In contrast, income rank did not demonstrate a significant unique longitudinal association with somatic depressive symptoms when simultaneously taking absolute income into account. There was no evidence for the assumption that depressive symptoms are predictive for future income rank (i.e., reverse pathway). Conclusions: Cognitive-affective symptoms of depression might be particularly responsive to social comparisons and a relatively low social rank.

Inequality and Social Rank: Income Increases Buy More Life Satisfaction in More Equal Countries.

How do income and income inequality combine to influence subjective well-being? We examined the relation between income and life satisfaction in different societies, and found large effects of income inequality within a society on the relationship between individuals' incomes and their life satisfaction. The income-satisfaction gradient is steeper in countries with more equal income distributions, such that the positive effect of a 10% increase in income on life satisfaction is more than twice as large in a country with low income inequality as it is in a country with high income inequality. These findings are predicted by an income rank hypothesis according to which life satisfaction is derived from social rank. A fixed increment in income confers a greater increment in social position in a more equal society. Income inequality may influence people's preferences, such that in unequal countries people's life satisfaction is determined more strongly by their income.

Buying Happiness in an Unequal World: Rank of Income More Strongly Predicts Well-Being in More Unequal Countries.

Does income rank matter more for well-being in more unequal countries? Using more than 160,000 observations from 24 countries worldwide, we replicate previous studies and show that the ranked position of an individual's income strongly predicts life evaluation and positive daily emotional experiences, whereas absolute and reference income generally have weak or no effects. Furthermore, we find the association between income rank and an individual's well-being to be significantly larger in countries where income inequality, represented by the share of taxable income held by the top 1% of income earners, is high. These results are robust to using an alternative measure of income inequality and different reference group specifications. Our findings suggest that people in more unequal societies place greater weight on the pursuit of higher income ranks, which may contribute to enduring income inequality in places where greater well-being can be bought from moving up the income ladder.

Comparing indices of relative deprivation using behavioural evidence.

What measure of relative deprivation best predicts health? While numerous indices of relative deprivation exist, few studies have compared how well different measures account for empirical data. Hounkpatin et al. (2016) demonstrated that the relative ranked position of an individual i's income within a comparison group (their relative rank) was a better predictor of i's health than i's relative deprivation as assessed by the widely-used Yitzhaki index. In their commentary, Stark and Jakubek (2020) argue that both relative rank and relative deprivation may matter, and they develop a composite index. Here we identify some issues with their composite index, develop an alternative based on behavioural evidence, and test the various indices against data. Although almost all existing indices assume that the significance of an income yj to an individual with income yi (yj>yi) will be some increasing function of the difference between yj and yi, we find that the influence of j's income on i's health is actually a reducing function of (yj-yi). This finding - that less significance is assigned to distant higher incomes than to near higher incomes - is consistent with the well-established idea that we compare ourselves primarily to similar others.

A methodological rejoinder to "Does income relate to health due to psychosocial or material factors?"

There is a presumption that when an individual's comparison of his income with the incomes of others in his comparison group yields an unfavorable outcome, the individual is dismayed and experiences stress that impinges negatively on his health. In a recent study, Hounkpatin et al. (2016) conduct an inquiry aimed at deciphering which measure of low relative income reflects better the adverse psychosocial effect of low relative income on health. Hounkpatin et al. pit against each other two indices that they characterize as "competing:" the "relative deprivation (Yitzhaki Index)" of individual i, RDi; and the "income rank position" of individual i, Ri. In this Rejoinder we show that because a measure of rank is embodied in the RDi index and the Ri index can be elicited from the RDi index, these two indices need not be viewed as competing. Furthermore, we formulate a composite measure of relative deprivation, CRDi, which can be used to assess more fully the psychosocial effect of individual i's low relative income on his health.