The relationship between money and happiness is a complex one. While it may seem intuitive that having more money leads to more happiness, research suggests it’s not quite that simple. In this article, we’ll explore the evidence around whether poor people are actually happier than rich people.
The Paradox of Money and Happiness
Numerous studies have found that once basic needs are met, more money does not typically lead to more happiness. This phenomenon is known as the Easterlin Paradox, after economist Richard Easterlin who first proposed it in the 1970s. The theory states that as societies become wealthier, the happiness of individuals does not increase accordingly. This suggests that relative income may matter more for happiness than absolute income.
For example, a person making $50,000 per year may be very happy if the people around them earn $30,000 on average. However, if they are surrounded by people making $100,000 or more per year, they may feel unhappy and deprived in comparison. So while higher income can improve happiness to a point by meeting basic needs, beyond that point, relative position matters more.
Do the Poor Worry Less?
Some research indicates that the poor may be happier partly because they have lower aspirations and expectations. With less available income, the poor simply cannot afford the same material luxuries and consumption as the rich. As a result, they learn to find happiness in smaller things that are more attainable.
The rich, on the other hand, habituate to luxury goods and status items, and these things may cease to provide happiness after awhile. The expression “mo’ money, mo’ problems” speaks to the idea that with wealth comes greater worries and responsibilities. The poor tend to report lower stress and anxiety in their daily lives, suggesting a more carefree existence.
Study on Mo’ Money, Mo’ Problems
A 2010 study published in Psychological Science examined levels of personal well-being at different levels of income. The researchers analyzed survey data from the Gallup Organization collected from over 450,000 Americans in 2008 and 2009. The data included measures of respondents’ life evaluation, emotional health, and basic psychological needs.
The study found that income only mattered for happiness up to about $75,000/year. Beyond that point, higher household income was not associated with greater positive emotions or better life evaluations. However, there was still an increase in feelings of stress and anger along with higher incomes beyond $75,000. This suggests that higher incomes may come with greater demands and ability to purchase luxury items, but not more day-to-day positive emotions.
Do the Poor Have Stronger Social Connections?
Some research suggests that poor individuals tend to be more socially connected than the wealthy. In poorer communities, people tend to look out for each other and engage in mutual aid networks based on reciprocity and sharing. Rich people, on the other hand, are more able to “pay” for services rather than rely on community, which could lead to weaker social ties.
Strong social connections are linked to happiness and well-being. Helping others also delivers psychological rewards like a sense of purpose. Therefore, the greater social capital of poor communities could be one reason why they maintain happiness despite having less money.
Study on Social Relationships and Poverty
A 2016 cross-cultural study published in the Journal of Personality and Social Psychology looked at the connection between socioeconomic status (SES) and social relationships. The researchers surveyed over 200,000 individuals across 136 countries, examining measures of social support and community trust.
Their analysis found that higher SES was associated with weaker social relationships on average. Community trust declined linearly with higher income levels. The researchers concluded that poor individuals tend to be more socially embedded and reliant on community, leading to stronger bonds and networks.
| Income Level | Level of Community Trust |
|---|---|
| Low income | High |
| Middle income | Moderate |
| High income | Low |
Is Happiness Relative?
As discussed regarding the Easterlin Paradox, research suggests happiness depends a lot on relative income and one’s peer group. Rather than absolute wealth, relative wealth and status seem to matter more psychologically.
Imagine two people earning $100,000 per year. One lives in an affluent coastal city like San Francisco or New York City. The other lives in a small Midwest town where the average income is $50,000. The person in San Francisco likely feels middle class or even poor by local standards. But the person in the Midwest town probably feels wealthy compared to neighbors. This illustrates the importance of relative income.
The Hedonic Treadmill
This constant comparison between one’s own income and others is sometimes referred to as the hedonic treadmill. People get accustomed to a certain lifestyle and income level. But when they compare themselves to others who have more, it reduces their happiness and satisfaction. This is why people tend to return to a relatively stable level of happiness despite changes in income and lifestyle over time. Our expectations and comparisons immediately adjust to new conditions.
Poor people may escape some of these negative social comparisons simply because they have fewer very wealthy people around them. They are able to compare themselves to their lower income peers and feel satisfied. However, if a poor person moves into a richer area, they are likely to feel inadequate and unhappy until they adjust to the new normal.
Conclusion
Based on the research, it seems poor people are often happier than their wealthier counterparts, despite having lower absolute incomes. Happiness depends heavily on social connections, managing expectations, and relative income. The poor tend to have advantages in these areas.
However, severe poverty that fails to meet basic needs like food and shelter would understandably cause unhappiness. The research is more focused on the middle and upper classes. Additionally, poverty correlates with higher rates of mental illness and stress from uncertainty. Still, for those able to meet their basic needs, focusing less on material status and more on community appears to be a reliable path to happiness across income levels.