Rising income inequality is accompanied by rising wellbeing gap in the U.S

I study happiness and income inequality over the past four decades using the American General Social Survey. Rising income inequality in the U.S. is hardly news. Happiness researchers are familiar with the so-called Easterlin paradox: despite economic growth, happiness is not growing--maybe happiness is not growing because inequality is increasing? Most researchers study income inequality and recently there is a growing interest in happiness inequality. Many researchers ask the right question: how the rising income inequality is reflected in happiness inequality. But they use the wrong approach to answer it--they simply measure dispersion in happiness for everybody, find it declining, and conclude that rising income inequality is not associated with rising happiness inequality. What needs to be done, however, is to compare happiness for the rich and for the poor; not the happiness for everyone. I will show that rich and poor Americans used to be not only more equal in terms of income, but also in terms of their subjective wellbeing: happiness inequality between the poor and the rich is increasing. But more fundamentally, I add evidence that inequality is bad for us: simply, today's poor suffer greater relative misery than the poor of past decades. This study links two recently fast growing literatures about income inequality and happiness. Income inequality is a fascinating topic because it is a defining feature of our times and is likely to increase in the foreseable future due to technological advances. A key question to ask is what inequality does to us? I will use a happiness yardstick to answer this question.