Relationship between income, happiness, and life satisfaction: Evidence from Lithuania

Abstract

For decades subjective well-being (SWB) has been receiving increasing attention from many perspectives, including health, personality traits, ageing, availability of social and medical services, and education. The research on the relation between happiness, life satisfaction, and income being the most popular. Many studies (e.g., Howell & Howell, 2008) support a wide spread opinion that income determines life satisfaction and happiness. However, there are many contradictions to this face value conclusion with rankings in the life satisfaction from high income countries (e.g., Denmark, Sweden) standing side by side with countries of much lower inco me (e.g., Mexico, Costa Rica) (Veenhoven, 2018). These data suggest an oversimplified understanding of the relationship between income and SWB that is misleading. In order to understand these differences three important questions, need to be answered. Does SWB depend on absolute income allowing for basic needs to be met, or does it depend more on relative income (on how a person sees economic wellness in their particular social context)? Next, does an increase in income impact SWB all the way along its rising path or is there a satisfactory level of income (a satiation point) beyond which happiness stops to follow increasing income? Finally, is SWB determined more by general economic factors, such as income, or peculiarities of social relationships within a given society? Answers to these questions are of great social importance, especially for countries dealing with low happiness, high suicide rates, and excessive emigration related to SWB; and are struggling to determine their priorities of social development. In this paper we study these factors in Lithua nia, concluding that relative income is an important factor influencing SWB, but that other factors come into play once a satiation level of income is reached.