Abstract
We examine how intergenerational mobility impacts on subjective wellbeing (SWB) drawing on data from the British Cohort Study. Our SWB measures encapsulate both life satisfaction and mental health, and we consider both relative and absolute movements in income. We find that relative income mobility is a significant predictor of life satisfaction and mental health, whether people move upward or downward. For absolute income, mobility is only a consistent predictor of SWB and mental health outcomes if the person moves downwards, and in this case the impact is far larger than relative mobility. For both relative and income mobility, downward movements impact SWB to a greater extent than upward movements, consistent with exhibiting loss aversion. Notably, we find that social class mobility does not affect SWB. We present evidence that the significant relative and absolute mobility effects we find operate partially through financial perceptions and consumption changes which can occur because of income mobility.
Highlights
Income mobility is regularly touted as a means through which individuals who were born into lower socioeconomic backgrounds can access a ‘better’ life
We find that upward mobility augments subjective wellbeing (SWB) and downward mobility deteriorates SWB, with the overall effects of downward mobility always being the greatest in magnitude
We argue that any stress effects caused in the immediate aftermath of downward income mobility can be exacerbated further, as individuals who report low levels of SWB are less likely to commit to the future and be optimistic
Summary
Income mobility is regularly touted as a means through which individuals who were born into lower socioeconomic backgrounds can access a ‘better’ life. The comparison group could be the income that an individual has experienced in their past This accommodates the notion that people feel relative changes in income more intensely than absolute levels of income (Rabin 2004). Clark and D’Angelo (2009) look at how upward social class mobility affects SWB by drawing on 15 waves of the British Household Panel Survey They find that individuals with greater mobility have higher levels of life satisfaction. Their scope is more limited than our study as they only consider upward mobility, defined as a binary indicator. We draw on the British Cohort Study (BCS) to show how income mobility affects SWB, and consider both relative and absolute inter-generational income movements. We present suggestive evidence that the income mobility effects we find operate partially through financial perceptions (i.e., how a person is feeling about their financial situation) and consumption changes which occurred because of mobility
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