Top-heavy dispersal of wealth linked to lower life evaluations

April 1, 2016 by Tom Fleischman, Cornell University

In their seminal 2010 study, Nobel laureates Daniel Kahneman and Angus Deaton of Princeton demonstrated that higher income improves one's life satisfaction but not one's emotional well-being.

Building off of that research, Cornell's Richard Burkhauser has co-authored a research paper that contends a person's satisfaction drops as the percentage of overall held by the very rich in a country rises. However, the authors say, this drop is minimal as long as the average person's income is also rising.

"Yes, it's true that when the top 1 percent is getting a greater share of overall income, this offsets our growing happiness to some degree," he said. "What is a problem is if that share continues to grow while income is falling for the rest of the population."

Burkhauser, the Sarah Gibson Blanding Professor of Policy Analysis in the College of Human Ecology, co-authored the study released in January on two working-paper sites.

Burkhauser notes, for instance, that in the U.S. from around 1970 through 2007, there was an increasing share of income held by the top 1 percent of the population, but this increase did not become a major political issue.

"The good news is, we also had a substantial increase in the income of the average American," he said. "That is, median income increased substantially, so everybody was better off."

But with the onset of the Great Recession in December 2007, median household income fell over the next five years from a business cycle high of $57,357 to $52,605. While it has risen slightly since then, it's still far below its 2007 peak. Hence, Burkhauser said, it is not a surprise that concern over the top 1 percent's income share is a major part of the 2016 election debate.

The study used data collected in the Gallup World Poll, which conducts surveys in more than 150 countries, interviewing approximately 1,000 citizens (age 15 and older) per country. Life evaluation is measured using the Cantril life ladder question: Respondents are asked to place themselves on a ladder or mountain representing , with the top step being "10" and the bottom step "0."

For questions regarding positive and negative emotional experience, citizens are asked about their well-being on the day before the survey. Questions include: Did you feel well-rested yesterday? Were you treated with respect? Did you feel physical pain?

One statistical finding worth noting: In terms of overall life evaluation, a 1 percent increase in the share of taxable income held by the top 1 percent has the same negative effect in as a 1.4 percent rise in the country-level unemployment rate.

However, consistent with the Kahneman and Deaton study, one factor not affected by greater income inequality is an individual's reporting of emotional experiences. These, the researchers suggest, are more closely tied to a person's day-to-day existence and interactions, and less with a person's financial situation and standing relative to others.

Explore further: Are you happier now than in years past?

More information: Top Incomes and Human Well-being around the World. ftp.iza.org/dp9677.pdf

Related Stories

Are you happier now than in years past?

March 17, 2016

"Take a moment and imagine a ladder with steps numbered from zero at the bottom to 10 at the top. The top of the ladder represents the best possible life for you, and the bottom of the ladder represents the worst possible ...

Middle class better off than previously thought

May 2, 2012

Long portrayed as stagnant, the income growth of the U.S. middle class may be more than 10 times greater than previously suggested by some economists, according to a new study at Cornell.

'Average American' will slide down income scale

August 30, 2013

The median household income for Americans reached an all-time high in 2000, fell during the recession of 2001, and was only approaching its 2000 level in 2007 when the Great Recession struck. By 2011 it had fallen back to ...

Recommended for you

Catalyst advance removes pollutants at low temperatures

March 25, 2019

Researchers at Washington State University, University of New Mexico, Eindhoven University of Technology, and Pacific Northwest National Laboratory have developed a catalyst that can both withstand high temperatures and convert ...

EPA adviser is promoting harmful ideas, scientists say

March 22, 2019

The Trump administration's reliance on industry-funded environmental specialists is again coming under fire, this time by researchers who say that Louis Anthony "Tony" Cox Jr., who leads a key Environmental Protection Agency ...

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

pntaylor
not rated yet Apr 01, 2016
Money can't buy happiness. This needs a study??!!

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.