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Income Inequality and Happiness

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Income-Inequality

Say what you will about Richard Florida’s theories about the rise of the “creative class” (and I say his work is already a relic of a more optimistic time), but he’s certainly right about the connections between economic growth evenly distributed across society and happiness. In fact, this seems so self-evident as to hardly be not worth study. But of course conservatives love economic inequality and so you actually do have to provide the empirical evidence that obvious points are true.

While happiness did track the level of economic development across these 16 advanced nations, the results changed when inequality was added to the equation. Higher levels of inequality led to lower levels of happiness, even in the most economically advanced nations. In fact, the researchers found that the percentage of respondents who said they were very happy was inversely cor­related with income inequality (with a negative correlation of −.618).

“Every single time income inequality decreased between two time points, the percentage of ‘very happy’ responses went up,” the researchers write. “And every time income inequality increased, the percentage of ‘very happy’ responses went down. In other words, although economic growth was steady and strong during this period, the evenness of the income distribution was fluctuating, and happiness was inversely related to income inequality.”

The second dataset covers happiness in 18 Latin American countries with less advanced, less developed economies, using data from the Latin American Barometer (or Latinobarómetro), an annual public survey of happiness and well-being. Here the study generated two key findings. Again the researchers found that inequality dampened happiness. But in contrast to the findings for the advanced nations, they found that happiness did not increase alongside economic growth.

When economic growth can’t buy happiness

What might explain this difference between the Latin American countries and the more advanced nations? One possibility is that the developed nations have lower levels of inequality, so that even when inequality reaches a high point, wealth is still distributed fairly evenly within a nation. Indeed, the study found that it is the even distribution of economic growth across a population that accounts for greater happiness. In contrast, when economic growth is concentrated among a small portion of a nation’s elite, it does not lead to greater life satisfaction.

Why, it’s almost like people are happy if they feel they are being treated fairly in their lives and aren’t victims of exploitation! Maybe this is a social end we should be fighting for!

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