Custodes Futurifor the advancement of humanity

Social factor, barrier 6 of 6

Status anxiety and social comparison

Status anxiety and social comparison are intensified by social media. When incomes at the top of the U.S. distribution rose, non-rich households spent more on visible goods and saved less (Bertrand and Morse, 2016).

Evidence

  • Neighbors' earnings. In U.S. panel data on 8,944 adults, people whose neighbors earned more reported lower happiness, holding their own income constant (Luttmer, 2005). German data found the opposite for neighbors, but comparisons with coworkers predicted lower wellbeing (Mayraz, Wagner, and Schupp, 2009).
  • Trickle-down consumption. Non-rich households exposed to higher top incomes spent a larger share of income, especially on visible goods, and reported more financial strain. Middle-income households might have saved an additional 2.6% to 3.2% of their income by the mid-2000s had top incomes grown at the same rate as median income (Bertrand and Morse, 2016).
  • Mixed evidence. A related study supports such "expenditure cascades" (Frank, Levine, and Dijk, 2014), but a working paper found no effect when comparison groups were defined by census division (Wang, working paper).

Proposed and experimental methods

Methods that are proposed, under trial, approved in some places, or tried and then failed. Each shows a stage label and an evidence rating. A stage label shows how far a method has progressed, not whether it works. The stage labels are explained on the social factor page.

  • Pay transparency laws (Approved but not scaled, contested, B). Canadian laws making university faculty salaries above a threshold public narrowed the gender pay gap by about 20 to 40% (Baker et al., 2023), but U.S. state laws protecting private-sector workers' right to share salary information lowered wages by about 2%, which the authors attribute to employers resisting raises that would trigger renegotiation with other workers (Cullen and Pakzad-Hurson, 2023). The EU Pay Transparency Directive, due to be transposed by 7 June 2026, gives job applicants a right to pay or pay range information, bars questions on pay history, and requires employers with 250 or more workers to report gender pay gaps yearly from 7 June 2027 (European Union, 2023). Its aim is equal pay, not reduced comparison, and its effects are not yet known.
  • Not shown to help: making individual incomes visible (Approved but not scaled, B). Randomly telling University of California employees about a website listing colleagues' salaries lowered job satisfaction and raised job search among those paid below the median for their unit and occupation, with no effect on those above it (Card et al., 2012). After Norway made individual tax records easily available online in 2001, the happiness gap between richer and poorer people widened by 29% and the life satisfaction gap by 21% (Perez-Truglia, 2020).
  • Reversed: hiding like counts on Instagram (Failed or reversed, C). Instagram tested hiding like counts "to see if it might depressurize people's experience," reported that this was "beneficial for some and annoying to others," and in May 2021 turned hiding into an option for each user (Meta, 2021). The announcement gave no outcome figures.

Sources cited on this page

  1. Bertrand, M., & Morse, A. (2016). Trickle-down consumption. Review of Economics and Statistics, 98(5), 863-879. DOI B Moderate: debated
  2. Frank, R. H., Levine, A. S., & Dijk, O. (2014). Expenditure cascades. Review of Behavioral Economics, 1(1-2), 55-73 B Moderate
  3. Luttmer, E. F. P. (2005). Neighbors as negatives: relative earnings and well-being. Quarterly Journal of Economics, 120(3), 963-1002. DOI D Contested: for the neighbor effect, B that social comparison affects wellbeing
  4. Mayraz, G., Wagner, G. G., & Schupp, J. (2009). Life satisfaction and relative income: perceptions and evidence. CEP Discussion Paper 938, Centre for Economic Performance, London School of Economics. LSE Research Online C Limited: not peer reviewed
  5. Baker, M., Halberstam, Y., Kroft, K., Mas, A., & Messacar, D. (2023). Pay transparency and the gender gap. American Economic Journal: Applied Economics, 15(2), 157-183. link B Moderate
  6. Card, D., Mas, A., Moretti, E., & Saez, E. (2012). Inequality at work: The effect of peer salaries on job satisfaction. American Economic Review, 102(6), 2981-3003. link B Moderate
  7. Cullen, Z. B., & Pakzad-Hurson, B. (2023). Equilibrium effects of pay transparency. Econometrica, 91(3), 765-802. link B Moderate

Every source for this factor is listed on the social factor page.