Diagnosing Our National Disease: Trends in Income and Happiness,1973 to 2004

An important paradox of the happiness literature is the apparent disconnect between economic growth and happiness, referred to as the “Easterlin Paradox.” Although real income has grown over the last thirty years, happiness has stagnated or perhaps even declined. There are a variety of explanations for this. Some emphasize psychological factors, such as relative deprivation or growing financial dissatisfaction, whereas others emphasize the behavior associated with higher incomes, such as longer work hours and the trade-offs such hours entail for leisure, relationships, and health. Drawing on the cumulative 1973 to 2004 General Social Survey and using a sample of working-aged adults, this article demonstrates the complexity of these trends and suggests that once we consider multiple sources of satisfaction, trends in real income have less paradoxical implications. The principal force behind declining happiness has been a decline in the number of working-aged Americans who are married, as well as declining marital satisfaction. These trends, however, have been largely independent of trends in income. In fact, once marital factors are considered, the negative trend in happiness reverses direction, and economic factors emerge as the single most important force underlying growing happiness. This result reflects a number of things. First, contrary to speculation regarding growing financial dissatisfaction, trends in financial satisfaction have, in recent periods, overlapped with gains in real income. Relatedly, perceptions of relative income have increased, despite growing income inequality. Finally, there is no evidence for “overwork” among families, at least as applied to happiness. To be sure, families are working longer hours, and there are (occasionally sharp) trade-offs between work hours and assorted sources of well-being. Nevertheless, families are far from the point where their work patterns begin to compromise their happiness. Indeed, families are, if anything, approaching an optimum. Overall the results suggest that happiness is the net result of multiple factors, and much can be gained by focusing on economic improvements, as well as the objective and subjectively rational behaviors underlying these improvements.