Wealth and Well-being in the United States

Abstract

With growing wealth inequality in the United States, understanding the implications on individual well-being becomes increasingly important. Prior research has found that economic well-being has a small but significant effect on well-being; however, much of the literature has used income as a proxy for economic well-being. This is a narrow measure of the resources that might influence an individual’s overall well-being, and does not capture an individual’s overall economic security. From a theoretical perspective, wealth is a better indication of life-time financial resources, as compared to income which is recorded at a point in time. More recent research has indicated that wealth, or income and wealth taken together, explain more of the variance in SWB than does income alone. I use the Panel Study of Income Dynamics (PSID) from 1984 to 2015 and the PSID “Well-being and Daily Life” supplement collected in 2016 to examine the relationship between well-being and several types of financial resources to determine which resources matter, and whether they matter separately or in combination. My findings indicate that well-being is associated with both income and wealth, controlling for other known correlates with well-being. When included in the same model both remain statistically significant and comparable in both magnitude and direction. Further, housing wealth itself matters for an individual’s reported satisfaction with overall life, even controlling for income and other assets. These findings further confirm the importance of accounting for the complex financial circumstances when trying to understand the implications of social inequalities on overall well-being.