The Effects of Lower Income
Uncontroversially, higher income is correlated with higher levels of happiness. Cross-sectional studies consistently show that at any given time, within any given nation, income is positively correlated with happiness7. Partly, however, this is explained by the fact that cheerful people tend to earn more8, and by ‘common causes’, such as improved education and absence of unemployment9.
Once these factors have been controlled for, the effect of increased income on happiness is much weaker than we would intuitively think, and it is dwarfed by non-financial factors. For example10:
| Effects on Happiness | Fall in Happiness (points) |
|---|---|
| Financial Situation | |
| Family income down by a third | 2 |
| Family Relationships | |
| Divorced (rather than married) | 5 |
| Separated (rather than married) | 8 |
| Widowed (rather than married) | 4 |
| Never married (rather than married) | 4.5 |
| Cohabiting (rather than married) | 2 |
| Work | |
| Unemployed (rather than employed) | 6 |
| Job insecure (rather than secure) | 3 |
| Unemployment rate up 10 percentage points | 3 |
| Community and Friends | |
| "In general, people can be trusted." Percentage of citizens saying yes down by 50 percentage points" | 1.5 |
| Health | |
| Subjective health down 1 point (on a 5 point scale) | 6 |
| Personal Values | |
| "God is important in my life." You say no to this rather than yes | 3.5 |
Table 1. The relationship between (un)happiness (scored from 10 to 100) and various key factors.
Another study calculated that, for the median single individual, the happiness boost produced by moving from a health rating of 3 to 4 (when health is scored from 1 to 5) is matched only by a 6,531% increase in absolute income, or by a move from the 50th to the 100th percentile in relative income11.
For individuals in developed nations, the effects of income on happiness are small. Moreover, the discussion so far has neglected one important aspect of the decision to give.
