Income, subjective well-being and the comparative perspective: An examination of relative income and its possible comparison standards

Although empirical research has generally demonstrated a significant, positive correlation between income and subjective well being (SWB), most researchers report that money explains a relatively small percentage of the variance in most measures of SWB. The comparative perspective, typically built on the premise that individuals determine their SWB by comparing their situation to some standard or material norm, represents one attempt to explain the uncertain relationship between income and well being. Also known as the relative income hypothesis, an important question raised by this contextual approach is "Relative to whom or to what?" This research focuses on a consumer's possible comparison standards and their impact on two measures of subjective well-being---financial stress and life satisfaction.;Data for this dissertation are drawn from a sample of over 600 married households from the United States. Structural equation modeling was used to examine three measures of relative income based on three comparison standards, listed here with their respective measures: comparison to referent others (self reported appraisals of income relative to referent others); to past experience (change in income over one year); and to expectations (difference between actual income and ideal income).;Results support the research hypothesis based on a comparison to referent others. Individuals who compared themselves favorably to referent others were more likely to report lower levels of financial stress and higher levels of life satisfaction. However, a change in income (comparison to past experience) and the difference between actual and ideal income (comparison to expectations) appear to have no influence on either financial stress or life satisfaction. The hypothesized negative relationships between income and financial stress, and financial stress and life satisfaction were supported using all three measures of relative income. However, the positive relationship predicted between income and relative income was only supported by one of the three measures.