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How economic inequality might affect a society’s well-being

Economic inequality is a major theme in the American political dialogue. As the country’s wealthiest people continually become richer at the expense of the poor, some research suggests they may actually become less happy and healthy. Economics correspondent Paul Solman reports on the nuanced data and the challenges of evaluating a society’s well-being.
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  • Judy Woodruff:

    Anger over economic inequality and its effects is an important theme running through our national politics in both parties now.

    But just how you gauge the true impacts of inequality on health and happiness is a bit more nuanced than you might think.

    Our economics correspondent, Paul Solman, dives into some of those distinctions. It's part of our weekly segment, Making Sense.

  • Paul Solman:

    As a record number of private jets descended on Davos last month for the World Economic Forum, the anti-poverty nonprofit Oxfam released its annual inequality statistics.

    According to Oxfam, the 26 richest people on Earth, just over the seating capacity of the Bombardier 7500, have the same net worth as the poorest half of the world's population, some 3.8 billion people.

    But a major discovery of medical research in recent years has been that inequality doesn't just weigh on those below.

  • Richard Wilkinson:

    The biggest effects are on the poor, but the vast majority of the population does less well if they're in a more unequal society.

  • Paul Solman:

    Epidemiologists Richard Wilkinson and Kate Pickett document this claim in their latest book, "The Inner Level."

    Yes, economic growth drives greater contentment, happiness, but only to a point.

  • Kate Pickett:

    In the rich, developed world, economic growth is no longer buying us gains in health and happiness.

  • Paul Solman:

    And so, as poor countries get richer…

  • Kate Pickett:

    Things get better.

  • Paul Solman:

    And then, if you have inequality or increasing inequality in that country, then you're going…

  • Kate Pickett:

    You will not be doing as well as the other rich countries.

  • Paul Solman:

    It's the difference between the U.S. and Scandinavia, says Pickett.

  • Kate Pickett:

    If you and I have equal education, the same incomes, the same wealth, the same social class, if you live in a more equal society than I do, you are more likely to live longer, your children to be healthier, less likely to do drugs or drop out of school. Everything about your world is going to be better

  • Paul Solman:

    Consider mental illness, which Pickett and Wilkinson first linked to inequality a decade ago.

  • Kate Pickett:

    Since then, I think we're seeing an epidemic of mental illness in the most unequal rich, developed countries, about 80 percent of our young people feeling incredibly stressed, many of them suicidal, many of them hurting themselves.

  • Paul Solman:

    And, of course, it's not just the young, says Pickett's husband.

  • Richard Wilkinson:

    In Britain, three-quarters of the population feel overwhelmed by stress and unable to cope.

  • Paul Solman:

    Three-quarters?

  • Richard Wilkinson:

    Three-quarters.

  • Paul Solman:

    This is a large sample?

  • Kate Pickett:

    Yes.

  • Richard Wilkinson:

    Yes, yes, from the Mental Health Foundation. A third of the population have had suicidal thoughts in the last year. And the figures in the U.S. are pretty similar. About 20 percent of your population have diagnosable mental illness at any one time.

  • Paul Solman:

    How does it work?

  • Richard Wilkinson:

    So we judge each other more by status in a more unequal society. And with that goes more worries about how we are seen and judged.

  • Kate Pickett:

    The effects are biggest among the poor. But they go right across to the top 10th, 10 percent of the income distribution. It affects our physiology, our hormones, the way we think, the way we behave. And those changes have been linked to a range of mental illnesses that we know are related to income inequality.

  • Paul Solman:

    According to GoodRx.com, depression and anxiety prescriptions are on the rise in the U.S., and they track income very closely.

  • Narrator:

    Even when you're taking an antidepressant, you may still be struggling with depression.

  • Paul Solman:

    Of course, richer people can afford more antidepressants and the like. But the well-off sure do consume a lot of them. And if depression isn't the functional definition of unhappiness, what is?

    After all, I asked economists Betsey Stevenson and Justin Wolfers, doesn't everyone know that more money doesn't make you happier?

    You hear it everywhere. After about $70,000 a year of household income — maybe it's a little more in San Francisco or something — people are no happier making more than that than the people who make that amount. True? No?

  • Justin Wolfers:

    It's a truism, but it's false.

  • Paul Solman:

    Wolfers cautions that Wilkinson and Pickett have taken the inequality argument too far.

  • Justin Wolfers:

    Rich people are happier than poor people, and that's true all the way along the income distribution. People earning half-a-million are happier than those earning a quarter-of-a-million, happier than people earning $100,000, happier than people earning $50,000, all the way.

  • Paul Solman:

    Now, wait a minute. What about 40 years worth of happiness research on lottery winners, going back to a widely trumpeted 1978 study?

  • Justin Wolfers:

    So that original study was a study of, I think, 30 lottery winners.

  • Paul Solman:

    Actually, just 22 lottery winners. But a much more recent study tracked hundreds of lottery winners in Sweden.

  • Justin Wolfers:

    It turns out that folks who won big lotteries are much happier than folks who won smaller lotteries, are much happier than folks who won no lottery whatsoever.

  • Paul Solman:

    Just as their cats may be, as this Swedish lottery ad suggests.

  • Justin Wolfers:

    So it turns out, big bump in income, big bump in happiness.

  • Paul Solman:

    The Pickett-Wilkinson response? Don't put too much stock into self-rated health and happiness reports.

  • Kate Pickett:

    So the United States has a very high level of good self-rated health. About 80 percent of Americans say their health is great. But their life expectancy is at the bottom of the international league table among the developed countries.

    Now, Japan, which has the highest life expectancy in the world, people live there longer than anywhere else, only about half of them think their health is good. So there's a complete mismatch between subjective and objective measures when it comes to health.

  • Richard Wilkinson:

    So you have to be very careful with that data.

  • Paul Solman:

    So when people report greater subjective happiness as a function of having greater wealth, are they kidding themselves?

  • Kate Pickett:

    No, they're not kidding themselves, but we find that these things are related to inequality. So you're much more likely to say that you are fabulous if you live in a more unequal society.

  • Richard Wilkinson:

    So, do you think you're a better driver than most Americans?

  • Paul Solman:

    I actually think I'm worse.

    (LAUGHTER)

  • Richard Wilkinson:

    Do you think your I.Q. is higher? Do you think you're more attractive? Do you think you're more generous?

  • Paul Solman:

    So, you think that the reason that — I can't remember the percentage, but 70, 80 percent of Americans think that they're, I think, much better than average drivers…

  • Kate Pickett:

    Ninety-six percent.

  • Paul Solman:

    Ninety-six percent think they're better than average. OK.

  • Kate Pickett:

    In Sweden, it's 66 percent. That is strongly linked to income inequality.

  • Paul Solman:

    In the end, though, while the two couples disagree about the effects of wealth on happiness, they're on the same page regarding inequality. That's because, says Betsey Stevenson:

  • Betsey Stevenson:

    Increases in income keep making you happier, but they're making you happier at a decreasing rate. It's just that that rate never goes to zero.

  • Paul Solman:

    : I see.

  • Betsey Stevenson:

    And that's an idea of diminishing returns, right? If I'm looking at a millionaire, to get the same boost in happiness for them, I'm going to need a lot more dollars than for somebody who is pretty low-income, because the relationship is with a percentage change.

  • Paul Solman:

    In other words, say these liberal economists, you can give one millionaire 10 percent more money to make him or her 10 percent happier, or you can divvy up that $100,000 among lower-income people to make each of them 10 percent happier.

  • Justin Wolfers:

    Paul, you may have just found the logic of redistribution, right? Take someone from a million to 1.1, take that $100,000 and find 20 people on $50,000, move them from $50,000, to 55,000, you have made 20 people get the same boost in happiness.

  • Betsey Stevenson:

    So, we have sacrificed one person with one decrease in happiness that's been offset by an increase in happiness that's 20 times the size.

  • Paul Solman:

    And if redistribution doesn't happen and inequality continues to grow?

  • Richard Wilkinson:

    If that whole society becomes very unequal, happiness and measures of well-being will decline.

  • Paul Solman:

    And that's the essence of what you're saying?

  • Richard Wilkinson:

    Yes.

  • Paul Solman:

    For the "PBS NewsHour," this is economics correspondent Paul Solman.

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