Why Income Inequality Is Dissatisfying - Perceptions of Social Status and the Inequality-Satisfaction Link in Europe

Abstract

This study proposes subjective social status - a person's perception of his/her standing in the social hierarchy - is an important psychological mechanism driving the inequality-satisfaction link. Building on sociological and social-psychological research, it argues (i) the contextual effect of income inequality on subjective well-being is mediated by social status perceptions, and (ii) income inequality moderates the relationship between subjective social status and well-being. The empirical analysis is based on data from the 2012/2013 European Social Survey. Applying multi-level modelling techniques, the study finds income inequality lowers the self-perception of social status and, in turn, the overall well-being of individuals (the mediation argument). It also finds that income inequality increases the importance of subjective social status to life satisfaction (the moderation argument). The results are limited to the European context and should encourage researchers to test the hypotheses in other geographic regions and to dig deeper into the underlying mechanisms explaining if and why income inequality matters to the well-being of individuals.