An individual's position in the income hierarchy is a stronger predictor of wellbeing than either how much they earn or how large the income gap is between them and others, new research from the University of Leeds, the University of Oxford and the University of Warwick finds.
The study, published in Nature Communications , goes on to show that the strength of the relationship between income rank and well-being varies significantly depending on the social and cultural context in which people live—and that strong civic and community life can substantially reduce it.
'The psychological consequences of where you stand in the income distribution are not inevitable. They depend heavily on the social connectedness around you. Societies that invest in community engagement appear to substantially buffer the status anxiety that income inequality can generate,' says the study's first author, Edika Quispe-Torreblanca , associate professor of behavioural decision making at Leeds University Business School .
Using data from more than 90,000 people across 109 countries, the study provides one of the most comprehensive cross-national tests to date of how income shapes life satisfaction and clarifies a long-standing debate about the mechanism behind the income-wellbeing relationship.
Key findings
Drawing on six survey rounds of the Gallup World Poll (2013–2024), the researchers uncovered several striking patterns:
- Income rank has a stronger relationship with well-being than absolute income—and the effect is large.
People with higher income rank report substantially higher life satisfaction. The estimated gap in life evaluation between people with lower and higher income rank is close to one point on a 0–10 scale. This effect is roughly twice as large as the well-being difference between being unemployed and being employed full time, and four times the difference between being single and being separated.
- Income rank better explains well-being than income gaps.
The researchers tested whether people are affected more by the number of people above them (rank) or by how much more those people earn (relative deprivation). Across 80% of countries, a pure income rank-based model fit best, indicating that people respond to their position in the hierarchy rather than the size of income gaps.
- Income rank matters less where social capital is high—and more in materialistic societies.
People who report strong social support, community engagement, or trust in institutions are less affected by where they sit in the income distribution. At the national level, countries with the highest civic engagement see an 80% smaller income‑rank effect on well-being that those with the lowest civic engagement.
By contrast, in countries with the most materialistic cultural values—where economic and physical security are prioritized over self‑expression—the link between income rank and well-being is more than three times as strong as compared to the least materialist countries.
Why this matters
People at the bottom of the income distribution consistently report worse mental health and lower life satisfaction, but there have been competing explanations as to why this is the case, including material deprivation, social rank and income gaps. If wellbeing suffers because of material deprivation, then growth and redistribution should substantially improve population happiness. If large income gaps are the problem, compressing the top of the distribution should help. But if what matters is income rank, the above measures are unlikely to improve population wellbeing substantially.
This has implications for policymakers: efforts focused solely on raising incomes may have limited impact on well-being if people's sense of status remains unchanged. Conversely, strengthening social capital may insulate individuals from the negative psychological effects of lower income rank.
For the general population, this suggests that the emotional impact of earning less than your neighbours is far less acute when community and belonging provide alternative sources of meaning and status.
'Improving wellbeing requires thinking beyond income and economic growth alone. While income clearly matters, our findings show that social capital—trust, community engagement and meaningful social participation—plays a crucial role in shaping how people experience their place in society and rate the quality of their lives,' says second author Jan-Emmanuel De Neve , professor of economics and behavioural science at Oxford University's Saïd Business School .
'Policies that strengthen social connection can therefore be just as important as those that raise incomes when it comes to bolstering wellbeing.'
Gordon D.A. Brown , professor of psychology at the University or Warwick , is the last author on the paper.
The paper, 'Social status and the relationship between income rank and well-being in 109 nations,' is published in Nature Communications .
