[Question] Evidence on correlation between making less than parents and welfare/​happiness?

[jessica_mccurdy]

Edit: Big thanks to all those who have responded to this. I have updated my views to be far less confident in my previous assumptions :)

I am in a friendly debate with a friend about the importance of finding a job that pays a lot of money. I am pretty convinced by the evidence that after a certain income additional increases barely increase happiness. My friend is skeptical about how these various studies assign causality and in particular thinks that they don’t pay enough attention to mobility. He claims that making less than his parents would be detrimental to his welfare and happiness since he is accustomed to that life style. My intuition says that he would just habituate to a less expensive lifestyle but he doesn’t think this is true. Does anyone know if there has been research on this? He has expressed that he would love to be convinced that he didn’t need a high paying job to be happy. :)

[David_Moss]

There is research on the links between downward social mobility and happiness, however:

These empirical studies show little consensus when it comes to the consequences of intergenerational social mobility for SWB: while some authors suggest that upward mobility is beneficial for SWB (e.g. Nikolaev and Burns, 2014), others find no such relationship (e.g. Zang and de Graaf, 2016; Zhao et al., 2017). In a similar vein, some researchers suggest that downward mobility is negatively associated with SWB (e.g. Nikolaev and Burns, 2014), while others do not (e.g. Zang and de Graaf, 2016; Zhao et al., 2017)

This paper suggests that differences in culture may influence the connection between downward social mobility and happiness:

the United States is an archetypical example of a success-oriented society in which great emphasis is placed on individual accomplishments and achievement (Spence, 1985). The Scandinavian countries are characterized by more egalitarian values (Schwartz, 2006; Triandis, 1996, Triandis and Gelfand, 1998; see also Nelson and Shavitt, 1992)...A great cultural salience of success and achievement may make occupational success or failure more important markers for people’s SWB.

And they claim to find this:

In line with a previous study from Nikolaev and Burns (2014) we found that downward social mobility is indeed associated with lower SWB in the United States. This finding provides evidence for the “falling from grace hypothesis” which predicts that downward social mobility is harmful for people’s well-being. However, in Scandinavian Europe, no association between downward social mobility and SWB was found. This confirms our macro-level contextual hypothesis for downward social mobility: downward social mobility has greater consequences in the United States than in the Scandinavian countries.

This is, of course, just one study so not very conclusive.

[ElliotJDavies]

Nice answer 😁

[jessica_mccurdy]

This is really helpful! I appreciate it :)

[Julia_Wise🔸]

My personal experience is that my parents spent money on some stuff that didn’t match my tastes. I spend less on some things than them (smaller living space, no car partly because I dislike driving) and more on other things (more expensive city).

I guess I think one major task of young adulthood is figuring out which of your formative influences will serve you well, and which you’d rather get rid of. He probably doesn’t want to be identical to his parents, so this is just one more thing to re-evaluate.

Another question is if he plans to have children, what does he want them to be accustomed to? Is the plan for every generation to be at least as rich as his parents so no one will experience a spending cut?

[Buck]

Inasmuch as you expect people to keep getting richer, it seems reasonable to hope that no generation has to be more frugal than the previous.

[GeorgeBridgwater]

In these sorts of discussions, I don’t think comparing ourselves to the rest of the population is a great guide. It should probably be our base rate but many other factors can affect how income impacts our happiness.

If we look at the overall population the income level required to get the maximum benefit from consumption is pretty high. However, there is some evidence that for people who adopt voluntary simplicity can achieve greater life satisfaction on less income. Boujbel (2012) explanation for this is ‘that the control of one’s consumption desires is a significant mediator of the relationship between voluntary simplicity and life satisfaction among consumers who have limited financial resources’.

So then the question is can you reduce your consumption desires if you start life with high consumption? I’ve seen a few people achieve this and I think I’ve reduced consumption desires over time as well. But this is pretty weak evidence to make broader inferences so I don’t put too much weight on it.

I’d be much more interested in studying how income (specifically consumed rather than donated income) effects life satisfaction and value drift amongst EAs. I’d weight this much more than the general population for my own decision making. If I had to bet I would expect similar findings to Boujbel.

[Ramiro]

Though I agree that the marginal utility of income drops a lot after some threshold, and I am not sure about how long people take to adjust their lifestyles to a drop in income, I would like to see a study taking into account the effects of wealth, savings and uncertainty. So yeah, maybe you’ll be equally happy if you earn 75k or 100k, but in the latter you’ll be better hedged against risks and be able to get additional utility by investing in someone else’s welfare (your relatives, or donations).

[ElliotJDavies]

My understanding was that life satisfaction (and happiness) was linked to how well we have achieved compared to peers. So it could be reasonable to suffer from doing worse than your family or other peers.

I should say I’m not sure how rigorous the research is on this though.

[Linch]

Only if you (and those you interact with) define “doing well ” as income!

[Gordon Seidoh Worley]

Taking a predictive processing perspective, we should expect to see an initial decrease in happiness upon finding oneself living a less expensive lifestyle because it would be a regular “surprise” violating the expected outcome, but then over time for this surprise to go away as daily evidence slowly retrains the brain the to expect less and so have less negative emotional valence around upon perceiving the actual conditions.

However I’d still expect someone who “fell from grace” like this to be somewhat sadder than a person who rose to the same level of wealth or grew up at it because they’d have more sad moments of nostalgia for better times that would be missing from the others, but this would likely be a small effect an not easily detectable (would expect it to be washed out by noise in a study).

[Linch]

I am pretty convinced by the evidence that after a certain income additional increases barely increase happiness

May I ask what the evidence is here? My vague impression from briefly looking into it a while ago was that happiness is very roughly proportional to log of income, so the marginal dollar is likely less worthwhile, but there isn’t a clear discontinuity/​dropoff anywhere.

[jessica_mccurdy]

From what I have read there is an important difference between perceptions of life satisfaction and well-being/​happiness. Perception of life satisfaction continues to grow but actual affective well-being basically stops increasing after around $75,000. I have seen this a lot stemming back to this study. I did most of my research on this a few years ago so it might be outdated. Of course well being research is just really difficult and it is still unknown what exactly we should be measuring.

[Linch]

Hi Jessica,

You might be interested in the latest study which seems to suggest that both life satisfaction and perceived well-being increases proportionally with log(income), though the former has larger correlation than the latter, at least for employed Americans in this large-scale study:

From the paper:

Data are from http://​​trackyourhappiness.org (18), a large-scale project using the experience sampling method (19, 20), in which participants’ smartphones were signaled at randomly timed moments during their waking hours and prompted to answer questions about their experience at the moment just before the signal. The present results are based on 1,725,994 reports of experienced well-being from 33,391 employed (emphasis mine), working-age adults (ages 18 to 65) living in the United States. Experienced well-being was measured with the question “How do you feel right now?” on a continuous response scale with endpoints labeled “Very bad” and “Very good,” while evaluative well-being was measured with the question, “Overall, how satisfied are you with your life?” on a continuous response scale with endpoints labeled “Not at all” and “Extremely.”

[...]

To formally assess whether experienced well-being plateaued around incomes of $75,000/​y, the association between income and experienced well-being was analyzed separately for incomes below and above $80,000/​y (the upper bound of the income band containing $75,000). Results showed that the slope of the association between log(income) and experienced well-being was virtually identical for incomes below and up to $80,000/​y (b = 0.109, P < 0.00001) as it was for incomes larger than $80,000/​y (b = 0.110, P < 0.00001). Although both forms of well-being rose linearly with log(income), the correlation was stronger for evaluative well-being (r = 0.17) than experienced well-being (r = 0.09, P_difference < 0.00001).

[MichaelPlant]

The most recent worldwide study on income and subjective well-being is Jebb et al. (2018). FWIW they find there are “satiation” points for the effect of income on SWB, measures as happiness, positive affect, and negative affect, nearly everywhere but that it’s often higher than $75k.

[Prabhat Soni]

BTW Jessica, the $75K figure from Kahneman’s paper that you mentioned is from 2010. After adjusting for inflation, that’s ~$90K in 2021 dollars (exact number depends on the inflation calculator you used).

[Linch]

Thanks a lot for the link, appreciate it!

[Linch]

Epistemic status: Uneducated guesses, however I’m more confident than usual for uneducated guesses that this points at a real effect, much less confident about effect sizes.

Great question! I don’t know the literature enough to provide a useful answer. However I think your friend may be framing this question incorrectly.

To the extent that we observe a correlation between income and happiness, and correspondingly decreased happiness from downwards social mobility, I think it is too hasty to jump to the conclusion that this is entirely or even primarily due to habituation to a wealthier lifestyle/​material goods. Here are two other hypotheses:

1. a) (Especially within the same country/​culture/​social group) income is used as a proxy for perceived social status, and b) social status is somewhat causal of perceived happiness (as measured by things like self-reported life satisfaction).

2. Income, social status, and happiness are all to some extent caused by some other underlying factor or set of factors, rather than a direct causal chain from Income → happiness or social status → happiness.

1) seems clearly plausible to me. Income is pretty frequently used as a proxy for social status,* both in our intuitive understanding of the world and in formal literature (hence phrases like “socioeconomic status”, “social mobility,” etc). So I think it’s plausible that a lot of the effects of observed income on happiness (and perceived dissatisfaction from downwards mobility) comes from a perceived gain(loss) of status, rather than from the gain(loss) of desired material goods or lifestyle.

1) will predict that people who willingly choose a lower-paying but equally (or more) socially desirable career than their parents will not be (much) less happy, and indeed may be happier. For example, people who willingly become academics, artists etc.

2) is less obvious, but also intuitively seems significantly more likely than not. For example, certain physical and mental disabilities (eg debilitating pain) likely reduces both your ability to earn significant income, and directly makes you less happy. Some environmental factors may do the same. More cheerily, traits that make people more well-liked may also makes people happier, even after you factor out the social aspects.

So you can think of social status both directly causal of happiness, but also having bidirectional effects with underlying environments/​traits that are themselves causal of happiness.

To the extent that they’re true, 1) and 2) may have implications for EA (not all of them positive). I can write out more speculations in a separate comment if people will find it helpful.