Thursday, September 10, 2009

What predicts income dissatisfaction?

Let's test the idea that as people attain higher status, they believe that their income is increasingly not enough to cover their expenses -- after getting that big promotion and moving to a better neighborhood, you've got more income, but it sure seems like life is more expensive, what with the private tutors and sports coaches for your kids, higher home prices, replacing the IKEA furniture with stuff from Crate & Barrel, etc. Life felt more affordable before.

The General Social Survey asks the following question:

Do you feel that the income from your job alone is enough to meet your family's usual monthly expenses and bills?

Note that the wording does not refer to things in the "take only what you need to survive" category. If you pay for tutoring, that's a usual monthly expense. If you go out to McDonald's several times a month, that's a usual monthly expense. So it's referring to whether the person's income is enough to support their broader lifestyle.

If the above idea is right, the percent who answer Yes should decline as we go up the status scale. In fact, the effect should be especially strong since this question was only asked in 2002 and 2006 -- right before the recent boom, and then during the height of the boom. People were furiously maxing out their credit cards, and they were surrounded by other people with lots of cool new stuff that they bought using maxed out credit cards. A feeling of income inadequacy at the higher status levels should have been particularly acute.

Out of curiosity, I also checked to see how income dissatisfaction varied within other demographic groups. Here are the results (click to enlarge):

The lowest income groups are the least satisfied, although once family income hits $20,000, dissatisfaction stays pretty constant. However, the very rich actually feel even more satisfied than other income groups. The same pattern holds for job prestige (socioeconomic index), education level, and self-reported economic class. Income dissatisfaction is basically constant across IQ levels (the lowest levels, 0 - 2, show funny results because of very small sample sizes). So, there is no evidence that higher-status people -- however measured -- are more bitter about their income level than lower or middle-status people. Quite the opposite.

As for age, surprisingly there is no big change from the college years through middle age, although by the time people are in their 60s, they are a bit more satisfied than before -- perhaps due to the falling need for social preening and oneupsmanship by then. Before then, though, more than 50% of each age group feels inadequate -- just unhappy in its own way (not getting a hot car when young vs. not finding a nice home when older).

Also surprisingly, there are are no race differences at all. We might have expected whites to feel more satisfied since they score higher on average for the above measures of social status. I fooled around by restricting the social status variables to the higher end or lower end, and it didn't seem to matter -- blacks and whites were still basically dead even. What they spend their money on may differ, but no racial group feels more or less satisfied than any other.

Finally, there is a gigantic sex difference, dwarfing anything else we've seen. While 57% of men are satisfied with their income, only 34% of women are. We can't attribute this to women wanting to shop more, or for more expensive things -- men have their eyes on super-expensive cars and other auto-related junk, amateur sports equipment, big flashy gadgets and electronics, and so on. And men don't make that much more than women, so it can't be due to differences in income. I think it must be a personality difference rooted in the brain's wiring. In questionnaires, women consistently score much higher on the personality trait Neuroticism than men. And this shows up in the real world, as they suffer more from depression than men. The feelings of anxiety, self-doubt, and impulsiveness that characterize Neuroticism should show up when we ask people if they're satisfied with their income level.

These other demographic findings are pretty neat, but the most robust and important finding is that income dissatisfaction does not increase as you move up the status scale. We may have this misperception because those higher-status people who are not satisfied are the ones most likely to speak up about it, and the ones who the media are most likely to cover because of the schadenfreude value it provides the readers with. No one wants to write or read a news feature on a bunch of people who say, "I'm rich and educated -- and it is all it's cracked up to be!"

GSS variables used: rincblls, race, sex, age, class, sei, wordsum, educ, realinc


  1. Another interesting article. I think there are probably others reasons women may report more income satisfaction though. One idea is that since men are usually perceived as the breadwinners (even today), women adopt a never-satisfied attitude towards money in order to push him up the income ladder. One should check this data for women who are in relationships and those who aren't. I would suspect income dissatisfaction to be higher for the former group.

    Also, women may be doing more of the shopping/paying bills in the household. In that case they have a better understanding of where the shortfalls are, whereas the husband just goes on merrily buying toys, while she is stuck with the mess of balancing the budget.

  2. The code book notes that the Quality of Working Life module, which includes the income satisfaction, was only given to the 1796/2765 employed people in 2002. It may be that the employed respondents are systematically different from the general population, particularly among the low income and the elderly.

    from the GSS question and module context, "income from job alone" suggests wage. Income = wages + rents + interests + profits. I also take this to exclude respondent's spouse's wages. the problem that sticks out in my head is that respondent's wage is only a portion of the family's real income, and there are differences between groups. Spousal income intuitively seems to be a big component of this noise.

    I'm slightly impressed by the approximately 40% of employed 68-87 year old people who can support themselves with a job.

    It’s interesting that your hypothesis is sort of opposite of Easterlin’s findings, that within a country increased income caused increased happiness, but between countries there was no correlation between national income and happiness. You hypothesize that wealthy people get so far on the hedonic treadmill that they're unable to pay. Stevenson and Wolfers seem to refute the hedonic treadmill argument and show that absolute income makes people happier, but I'm not sure about the overspending.

    Jason, your comment about women nails it. If respondent is employed but not the major breadwinner, her income is almost certainly insufficient to provide family's needs, though the family's income may be more than sufficient. perhaps her never dissatisfied attitude relates to the general trend of declining female happiness?

    this is a very interesting study and there are many ways it could go :)