Many economic studies discuss the relationship between income and happiness. This is not a formal economics blog, so I will not introduce them. Therefore, the research part will not be too detailed or accurate. I mainly want to talk about my own thoughts. For details of the studies, please see my references.
Easterlin Paradox
The Easterlin Paradox was proposed by Easterlin in 1974. In the same country and at the same time, people with higher incomes are subjectively happier than those with lower incomes. However, in different countries, people in rich countries are not happier than those in poor countries; and in the same country, income grows over time, but the level of happiness does not rise accordingly.
Relative Income and Happiness
Many economic studies have shown that happiness is negatively correlated with the income of others and with one’s own past income. For example, if my annual salary is 100,000 today, but the friends and colleagues I come into contact with only have 70,000, I will be very happy and have a sense of superiority. But if my annual salary is now 200,000 and my quality of life is much better than when my annual salary was only 100,000, but my friends and colleagues around me have annual salaries of 300,000 or 500,000, the sense of superiority disappears. Instead, I will envy those high-salary colleagues. Why do they have higher salaries when they do similar things?
Social networks have exacerbated this situation. Everyone puts their best side on social media, so it looks better than the real situation, and I feel relatively worse.
Obviously, relative income with others is a zero-sum game. Today when my income ranking rises, someone’s income ranking will fall behind. When everyone becomes richer together today, the things everyone wants will also become more expensive along with it. Prices will only go up and in the end we can only afford the same things as before and still be unhappy.
The Pain and Happiness of Growth
Happiness is negatively correlated with past income, so getting a raise is certainly happy. As a normal employee, the opportunity for a substantial raise comes from job promotion and job hopping. Once promoted or job-hopped, the people I compare myself to become more senior colleagues or colleagues from new companies. I have grown and come to a stronger peer group, but my relative salary remains unchanged compared to those around me. The world is so big so there are always people who are better than me and richer than me. While constantly growing and constantly changing to stronger peer groups, my income is much better than when I was a new grad, but my relative income has not increased compare to my current peer group. The happiness of getting a raise is quickly eaten away by the unhappiness of low relative income.
Happiness is Not Envy
The poor in modern affluent countries live much better than the emperor did a hundred years ago - with good sanitary conditions, countless entertainment options available on their phones, and affordable travel abroad. In the past when commercial flights were not popular, even the emperor had to spend extremely much time traveling abroad. But the emperor from a hundred years ago was probably still happier than most of us because his living conditions were the best among the people he could come into contact with.
Being the big boss in a newbie village is the happiest because I am the strongest in my peer group. But I choose to grow and join stronger peer groups to live a less happy life. In that case, I can only bear the corresponding consequences - being unhappier.
Happiness has subjective components, so there are things I can do: look at social media less often, continue to interact with people outside of my peer group, accept that this is the cost of growth and increased income, and tell myself not to be envious.