Think money can’t buy happiness? Think again.
Research has continually found that people are more satisfied when they have higher incomes. But they grow decidedly less satisfied as the average income of their peers rises.
As Lewis Davis, professor of economics, puts it, “driving my new BMW may make me happy, but I’m a bit less pleased when you pass me in your Porsche.”
Yet recent work by Davis and Stephen Wu challenges this conclusion that personal status matters so much. They uncovered a more nuanced picture by breaking things down by race.
While white people were unhappier about their lives as other white peoples’ incomes increased, the opposite was true for African Americans. They became more satisfied the more money their fellow African Americans made.
Why? The researchers examined several possible explanations, including information effects and racial solidarity.
Davis describes the relationship between income and information effects like this: “If you’re in graduate school and other students are getting great jobs, you think, ‘I’m going to get a great job, too.’ You’re happy others are doing well because it indicates you will, too.”
So Davis and Wu looked at African American retirees. If information effects were the main explanation, retiree happiness wouldn’t be correlated with rising peer income because retirees aren’t working or looking for work. What Davis and Wu found was that retirees were just as happy about increasing African American income as working people, so information effects couldn’t be a key factor.
Racial solidarity, then – a sense of common identity and empathy – better explained why African American satisfaction was positively correlated with rising African American income.
This sense of common identity was also found in whites, when social salience was taken into account.
“In Japan, you’re more aware of your racial identity if you’re Caucasian because of the relative scarcity of white people there,” Davis explained. “Being white is less present in your own mind in, say, Iceland.”
In a nutshell, white racial solidarity was stronger in places where whites made up a smaller share of the population. Whites were happier about the success of other whites in California, where their numbers are fewer, than they were in Maine or Vermont.
“The same thing was true for being African American,” Davis said. “African American solidarity was stronger in states like Vermont and weaker in states like Mississippi.”
“Status and solidarity were present for both groups,” he added, “though solidarity was dominant for African Americans in every state and status was dominant for whites in every state.”
“We thought of it as something constructed out of a common history and experience of racism, things that bind the African American community together,” Davis said. “The success of the Civil Rights Movement demanded tremendous solidarity.”
Stephen Wu of Hamilton College contributed to this research.