Researchers from Cardiff and Warwick Universities looked at data on earnings and life satisfaction from seven years of the British Household Panel Survey (BHPS), which is a representative longitudinal sample of British households.
They first examined how life satisfaction was related to how much money each person earned. They found however that satisfaction was much more strongly related to the ranked position of the person's income (compared to people of the same gender, age, level of education, or from the same geographical area).
The results explain why making everybody in society richer will not necessarily increase overall happiness – because it is only having a higher income than other people that matters.
The researchers conclude that "there are fixed amounts of rank in society—only one individual can be the highest earner. Thus, pursuing economic growth, although it remains a key political goal, might not make people any happier."
Citation: Christopher J. Boyce, Gordon D.A. Brown, Simon C. Moore, 'Money and Happiness Rank of Income, Not Income, Affects Life Satisfaction', Psychological Science, February 2010; doi: 10.1177/0956797610362671