Happiness Without a Financial Safety Net: Low Income Predicts Emotional Volatility
Decades of research suggest that money buys very little happiness. However, previous studies have relied on static measures assessing people’s well-being once or on average. We examine the “reel” of people’s emotional lives through over 1 million reports from 23,000 individuals whose happiness was tracked in real-time using a smartphone app. Results show that lower income is associated with increased happiness volatility—a relationship replicating across multiple operationalizations of volatility, statistical models, and a sample of individuals from six developing countries (N > 25,000). An unsupervised anomaly detection algorithm further revealed that the greatest gap is between how frequent and intense the rich and the poor experience emotional downs, not ups. The happiness gap between the highest and lowest earners during episodes of intense unhappiness was 1.5 to 3 times the size of the gap in average happiness between these two groups. Finally, exploiting the exogeneity of monthly payments, we find that low-income people experience more moments and periods of anomalous happiness the last few days of the month, suggesting a causal relationship between income and happiness volatility.