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dose the money buy happiness
The relationship between income and happiness for international
immigrants has been relatively unexplored. A handful of cross-sectional
studies has shown that income and happiness are positively correlated
after migration, and that wealthier immigrants are more satisfied with their
post-migration lives than are their less privileged peers. What is unclear is if
the link between income and happiness remains positive as immigrants
assimilate to life in a new country. This question is the focus of our study.
Using longitudinal data from over 10,000 immigrants tracked up to 30 years
in the German Socio-Economic Panel Survey, we set out to provide some
insight into the long-term relationship between immigrants’ self-reported life
satisfaction and the level of their income in its absolute form. Longitudinal
analyses revealed that immigrants who experienced increases in income
over time reported greater satisfaction with life and that the
income-happiness link remained relatively stable over time. The effect of
absolute income on immigrants’ happiness was, nevertheless, small. We
also observed that country of origin played an important role in the
post-migration association between income and happiness. Income was a
stronger predictor of the life satisfaction of immigrants from poorer origins
than it was for their wealthier counterparts.
Happiness; Life satisfaction; Absolute income; Immigrants
People move to another country for a host of reasons, including family
circumstances, political upheavals or natural disasters. Regardless of
motivation, people migrate seeking a better life and economic progress is
often cited as an important component of such a life. Strong labor markets
and wage differentials between sending and receiving countries are proven
drivers in the decision to migrate (Massey et al. [42] ). Relatedly,
neoclassical economic theorists argue that utility maximization is central to
the migration decision and that people move where they anticipate the
largest economic return (Massey et al. [42] ).
It is well-established that immigrants choose wisely as most improve
economically in destination countries (Pekkala and William [46] ). We also
know that this economic progress is associated with immigrants’ happiness
(Bartram [10] ; Knight and Gunatilaka [33] ). Contrary to expectations,
however, immigrants’ happiness1 [ 1] declines with time in destination
countries (Obúcina [43] ; Stillman et al. [56] ). These counterintuitive
findings, from separated strands of the literature, suggest that economic
progress may not be a lasting source of happiness for immigrants.
The relationship between income and happiness for international
immigrants has been relatively unexplored. A handful of cross-sectional
studies has shown that income and happiness are positively correlated
after migration, and that wealthier immigrants are more satisfied with their
post-migration lives than are their less privileged peers (Bartram [10] ;
Knight and Gunatilaka [33] ). What is unclear is if the link between income
and happiness remains positive as immigrants assimilate to life in a new
country. This question is the focus of our study. Using longitudinal data
from over 10,000 immigrants tracked up to 30 years in the German
Socio-Economic Panel (G-SOEP) Survey, we set out to provide some
insight into the long-term relationship between immigrants’ self-reported life
satisfaction and the level of their income in its absolute form.
As the number of international migrants worldwide grows (International
Organization for Migration [29] ), their successful integration into the social
fabric of destination countries becomes increasingly important. While this
has been a constant concern to policy makers and scholars, subjective
measures of immigrants’ satisfaction with life in recipient societies are still
somewhat novel in the assimilation literature.
Subjective measures of immigrants’ well-being, such as happiness, can be
a complementary indicator of immigrants’ integration because, unlike
traditional measures of language proficiency or occupation, happiness can
capture how immigrants assess the overall quality of their lives in the new
country (Veenhoven [58] ). In addition to being an intrinsically interesting
measure of incorporation, higher levels of happiness have been associated
with outcomes that may facilitate the integration of newcomers. For
instance, there is evidence that happier people are more cooperative
(Lount [37] ), productive (Luhmann et al. [41] ; Peterson et al. [47] ), and
tend to live healthier (Davidson et al. [19] ; Steptoe et al. [53] ) and longer
lives (Danner et al. [18] ; Wiest et al. [62] ).
Understanding the long-term relationship between income and happiness
is important because if the positive income-happiness link fades as
immigrants settle in destination countries, economic progress per se may
not be a valid pathway to lasting happiness for international immigrants.
Income and Happiness for International Immigrants
There is little disagreement that income is correlated with life satisfaction.
Much evidence has shown that wealthier people and nations are happier
than their less privileged counterparts (Diener and Biswas-Diener [21] , [22]
; Gardner and Oswald [24] ). Income has also shown to increase happiness
in the long-run, although the nature of the relationship is not the same for
everyone. Money brings the most happiness when we are in need
(Blanchflower and Oswald [12] ; Deaton [20] ; Sacks et al. [49] ; Stevenson
and Wolfers [54] , [55] ). Money is more important for our happiness when
we use it to put food on the table or a roof over our heads, than when our
basic needs are satisfied and we use it to purchase non-essential items to
fulfill idiosyncratic needs (Veenhoven [57] ).
While the question of whether money buys happiness has been of interest
to the humankind since the time of Aristotle, it was not until 1979 that Piore
speculated about the role of income on the lives of labor immigrants. Piore
believed that income would only matter to newcomers at the beginning of
their migratory careers. He held that immigrants moved to wealthy
countries after being recruited by industries that needed labor to do the
work that native-born people did not want to do. The initial economic gain
experienced after migration would be particularly salient for these
immigrants coming from poorer countries. This initial advantage, however,
would disappear as immigrants improved economically, met their basic
financial needs, and non-pecuniary factors associated with long-term
residence became more salient (Olgiati et al. [44] ).
Piore ([48] ) did not anticipate how his thesis about the economic progress
of labor immigrants would affect their satisfaction in destination countries.
What is more, until very recently contemporary scholars of immigration
have not investigated the role of income on the happiness of international
immigrants. Studies have shown that, at any given point, wealthier
immigrants are more satisfied with their lives than less privileged
counterparts in traditional destination countries across Europe (Safi [50] ;
Vroome and Hooghe [59] ) and the United States (Bartram [10] ). This
cross-sectional evidence is important because it suggests that absolute
income and happiness are connected after migration. However, it does not
address whether they are linked throughout immigrants’ careers. While
there is little contention that absolute income brings life satisfaction to
international immigrants in destination countries, it is unclear that this
correlation persists over time.
Using data from the Gallup World Poll, Olgiati et al. ([44] ) investigated this
question across Canada, the United States, Australia, and thirteen
additional European destinations. In lieu of panel data, information on
immigrants’ origin, or years since migration, the authors assumed steady
upward mobility and employed immigrants’ position on the income
distribution as a proxy for their time in destination countries. Results
revealed that, across most destinations, absolute income and happiness
were correlated only for immigrants situated at the lower-end of the income
distribution. Immigrants at the top of the income distribution derived life
satisfaction from their income only in a handful of countries. The authors
interpreted these findings as evidence that income contributed to the life
satisfaction of newcomers in destination countries only at the beginning of
their migratory careers.
While it is well established that immigrants improve economically over time,
not all experience linear upward mobility post-migration. Destination
countries have segmented labor markets, and as a result, some groups of
immigrants remain at the bottom of the income distribution throughout their
migratory careers (Algan et al. [3] ; Lehmer and Ludsteck [36] ). Some
immigrants lack the labor market skills that are valued in their destination
countries. Others have the skills, but struggle to have their foreign
qualifications recognized (Hirsch et al. [28] ). Many immigrants face a host
of other barriers associated with a foreign-born status, such as
discrimination or lack of social capital, that place them at a disadvantage
when competing in the job market with the native-born population (Aslund
et al. [8] ).
However, not all immigrants come from poor countries, or end up at the
lower end of the income distribution. Countless factors influence the
decision to migrate, including the desire to acquire further education, or to
take advantage of a career opportunity (Kennan and Walker [32] ). As a
result, immigrants are a heterogeneous group of individuals present in all
the socioeconomic strata of their destination countries.
From this perspective, the positive association between absolute income
and happiness observed among immigrants at different points of the
income distribution in prior cross-sectional research may not indicate that
income contributes to the life satisfaction of immigrants only at the
beginning of their migratory careers. An alternative explanation is that
absolute income brings happiness to immigrants throughout their migratory
careers, but its impact is different for different groups of immigrants.
We know that all immigrants are not equally (un)happy in destination
countries (Simpson [52] ). For instance, a series of studies that investigated
the happiness of different groups of immigrants in the same country found
that immigrants from Europe were more satisfied with their lives in Israel
than counterparts from the former Soviet Union or Ethiopia (Amit [5] , [6] ;
Amit and Litwin ([7] ). We also know that immigrants from poorer origins
have the most to benefit from gains in income in their destination countries
(Hendriks [27] , Simpson [52] ). For instance, Bartram ([10] ) found that the
association between absolute income and happiness in the United States
was stronger for immigrants from Asia, Latin America, and Africa than it
was from their counterparts from Europe and Canada. Another study found
that low-income Moroccan immigrants in the Netherlands obtained more
satisfaction from their absolute income than their wealthier Turkish
counterparts (Gokdemir and Dumludag [25] ).
In sum, the literature has established that most immigrants advance
post-migration economically, but that their life satisfaction declines with
time in destination countries. In light of traditional theories of labor
migration, scholars have interpreted these counterintuitive findings as an
indicator that income, in its absolute form, contributes to the happiness of
international immigrants only at the beginning of their migratory careers.
However, limitations stemming from cross-sectional data have precluded
prior research to investigate if the positive link found between income and
happiness fades over time, or varies across immigrants from different
origins. The current study advances the literature by exploring ( 1) whether
the association between income and happiness weakens over time for
international immigrants, and (2) whether this potential long-term
income-happiness link varies across immigrants from different countries of
Germany, the main immigration country in Europe, is the setting for our
study. Two main reasons motivated our choice: the heterogeneity of its
immigrant population, and the existence of longitudinal survey data about
immigrants’ earnings and their satisfaction with life.
Germany has one of the most heterogeneous immigrant populations in
Europe. It is the result of a combination of guest worker programs,
sociopolitical circumstances, and an enticing labor market for highly
qualified immigrants. Germany started attracting low-skilled manual labor
through formal guest worker programs established in the 1960s after the
European economic recovery. These immigrants, known as Gastarbeiter,
came from Turkey and other countries of Southern Europe such as Spain,
Greece, and the former Yugoslavia. Although these guest worker programs
ended with the economic crisis of the 1970s, immigration of manual labor
from these countries still continues. Subsequently, a large group of ethnic
Germans from Eastern Europe known as Aussiedler moved to Germany
after the collapse of the former Soviet Union. In the following decades, as a
result of the European Union, Germany has attracted a heterogeneous
group of immigrants from other European origins (Obúcina [43] ).
The second advantage of Germany as a setting for the underlying study is
the existence of the German Socio-Economic Panel Survey or G-SOEP.
The G-SOEP is a representative panel survey of private households
conducted by the German Institute for Economic Research. It contains
income and happiness data from over 10,000 immigrants tracked up to
30 years. The first set of interviews started in 1984 and contained an
oversample of immigrants from the former guest-worker countries, Italy,
Spain, Greece, Turkey, and Yugoslavia. In 1994, oversamples of ethnic
Germans from the former Soviet Union and other Eastern European
countries were added to the survey (Wagner et al. [60] ).
Our study draws on data from 10,425 immigrants across 30 years
(1984-2013) producing a total of 65,606 observations. The average
participant was on the panel for 6.3 years. Similar to most panel data, the
current dataset is unbalanced. Some respondents participated for more
years than others. Methodologists have recommended the use of multilevel
modeling to analyze unbalanced panel data (Cnaan et al. [16] ). Following
this recommendation and prior research on G-SOEP (e.g., Cheung and
Lucas [14] ), we used multilevel modeling for our main analyses.
We classified immigrants by country of origin as ( 1) Turkish immigrants,
respondents born in Turkey; (2) Southern Europeans, immigrants from
Italy, the former Yugoslavia, Spain, and Greece; (3) Eastern Europeans,
ethnic Germans born in the former Soviet Union and other Eastern
European countries; and (4) other immigrants, a residual heterogeneous
group primarily comprised of immigrants from other European countries,
Austria, France, the Netherlands, and from the United States (Obúcina [43]
Immigrant satisfaction with life was our dependent variable. It was captured
with the question: “All things considered, how satisfied are you with your life
as a whole?” and measured on an 11-point scale (0 = “totally dissatisfied”
to 10 = “totally satisfied”). Single-item life satisfaction measures have
shown satisfactory reliability and validity (Cheung and Lucas [13] ; Lucas
and Donnellan [39] ).
Post-governmental household income (i.e., income after tax and
governmental transfer) was our main predictor. We adjusted income for
inflation using the consumer price index to improve the comparability of
incomes from different years. In addition, we transformed income
logarithmically with a base of 2, so that a one-unit increase in
log-transformed income represents a twofold increase in actual income.
The remaining variables included in the analyses are established correlates
of life satisfaction. We adjusted for respondents’ ages (16-years of age and
over) because there is evidence that the link between income and
happiness is stronger at midlife (Cheung and Lucas [14] ). Gender was
included because women tend to be happier than men (Graham and and
Chattopadhyay [26] ). Education was also a factor. People with more years
of schooling tend to be more satisfied with life (Cuñado and Pérez de
Gracia [17] ). Another factor was marital status because people who are
married or partnered are generally considered to be happier than their
single counterparts (Lucas et al. [40] ). There is evidence that
unemployment decreases life satisfaction, so employment status was also
included (Lucas et al. [38] ). Finally, we computed years since migration by
subtracting the year that the respondents entered Germany from the survey
Empirical strategy
The main purpose of our analysis was to test ( 1) whether the link between
income and life satisfaction was positive throughout immigrants’ careers,
and (2) whether this potential association varied by their country of origin.
We approached these questions using a series of random-intercept
hybrid-effects regressions, which is a specific kind of multilevel models
(also known as hierarchical models or linear mixed effects models) (Allison
[4] ). There are two key aspects to this approach. ( 1) The random-intercept
part, which was used to account for the clustering of the data. (2) The
hybrid-effects part, which was used to examine the within-person effect of
The multilevel structure of our longitudinal data—time (level-1) nested
within participants (level-2)—suggested the use of multilevel modeling as
the most appropriate approach. To ensure the appropriateness of using
multilevel modeling, we computed the intraclass correlation of life
satisfaction by estimating a random-intercept model with life satisfaction as
the outcome, participants as the grouping variable, and no predictors (an
unconditional model). The intraclass correlation was 0.41. In other words,
forty-one percent of the variance in life satisfaction was explained by the
fact that the same participants reported life satisfaction multiple times.
Therefore, a random-intercept was needed to account for the
non-independence of the data. All analyses were conducted using the lme4
and lmerTest packages in R (Bates et al. [11] ; Kuznetsova et al. [34] ).
A hybrid-effects model was used because it estimates the between-person
effect of income and the within-person effect of income while allowing for
the inclusion of time-invariant variables (Allison [4] ). The within-person
effect of income is our primary interest because the within estimator
specifically tests whether changes in income are associated with changes
in life satisfaction. Although fixed-effects modeling is a common way to
estimate the within-person effect of a predictor, time-invariant variables
(such as immigrant groups) cannot be included. Given our interests in
immigrant groups (which is a time-invariant variable), we opted to use
hybrid-effects models. In this approach, we created two variables related to
income: ( 1) between-person income and (2) within-person income.
Between-person income refers to the average income of an immigrant
across years, whereas within-person income refers to demeaned income,
or how one’s yearly income varies around one’s average income. To be
clear, the between-person income tests whether immigrants with a higher
average income were more satisfied than immigrants with a lower average
income. The within-person income tests whether immigrants became more
satisfied as their income increased over time.
All continuous variables were grand-mean centered, and all categori …
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