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Evidence on correlation between making less than parents and welfare/happiness?

by jessica_mccurdy1 min read14th Oct 202015 comments

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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. :)

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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.

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?

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.

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).

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.

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).