Knowing that you are paid less than your peers has two effects on happiness. The well-know

Knowing that you are paid less than your peers has two effects on happiness. The well-known one is negative: a thinner pay packet harms self-esteem. The lesser-known one is called the " tunnel effect" : high incomes for peers are seen as improving your own chances of similar riches, especially if growth, inequality and mobility are high. A paper authored by Tom Dorson of the University of St Andrews separates the two effects using data from household surveys in Germany. Previous work showed that the income of others can have a small, or even positive, overall effect on peoples satisfaction in individual firms. But Mr. Dorsons team hypothesized that older workers, who largely know their lifetime incomes already, will enjoy a much smaller tunnel effect. The data confirm this hypothesis. The negative effect on reported levels of happiness of being paid less than your peers is not visible for people aged under 45. It is only those people over 45, when careers have "reached a stable position" , whose happiness is harmed by the success of others.

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