April 07, 2015

Feeling less “well-off” than your peers can lower general health and motivation

Feeling less “well-off” than your peers can lower general health and motivation

Evidence shows that relative deprivation:

  • has a significant impact upon health and happiness levels
  • can be aggravated by policies which draw attention to status
  • may require grass-roots psychological services and redistributive policies

Job rates were not the only casualty of the economic crisis – happiness levels also took a hit. However, even since labor markets started to pick up, average happiness levels have remained stagnant.

A new article by Xi Chen discusses the effect of social inequality on general well-being. He compiles evidence to show that people who are relatively less “well-off” than their peers suffer from significantly lower levels of happiness and motivation. In other words, despite sharp rises in income, persistent inequality has prevented average well-being levels from improving.

Chen suggests that policymakers could focus on redistributing wealth to mitigate the effects of relative deprivation – but he notes that such measures should be planned with care. These kinds of policies risk drawing attention to status and wealth, and could therefore aggravate feelings of inferiority among people lower down in the social hierarchy.

He discusses the merits of policies which could help to raise general living standards, such as universal basic education, and basic health service provision. He also advocates visibility-based consumption tax and traditional sanctions, which do not openly discriminate by socioeconomic status.

Relative deprivation and individual well-being, by Xi Chen, was published on 7th April 2015.


Author quote: “Low socio-economic status, feelings of relative deprivation, and the resulting costly competition for higher status undermine happiness and health. Effective policy instruments may involve consumption taxes on status-marking goods, community sanctions, and redistributive measures.”

IZA World of Labor is a free, online resource created by the Institute for the Study of Labor (IZA) in collaboration with Bloomsbury Publishing Plc. Articles focus on global labor economics issues, drawing on empirical, evidence-based research in order to offer pertinent comment and evaluation, and best-practice policy advice.

Xi Chen is an assistant professor at Yale University, a faculty fellow at the Yale Institution for Social and Policy Studies, and a faculty advisor of the Yale-China Association. He joined the IZA as a Research Fellow in 2014.