A new study has provided deeper insights into the nuanced relationship between income and self-esteem. The research, published in Psychological Science, highlighted how having higher personal earnings is a strong source of higher self-esteem in subsequent years but is less of a consequence of higher self-esteem.
Self-esteem can be defined as a person’s evaluation of their own worth. Many previous studies have found a small but positive association between income and self-esteem. In other words, individuals with higher incomes tend to have higher self-esteem.
However, little is known about how income and self-esteem change within individuals over time.
To better understand the link between income and self-esteem, the study team led by Wiebke Bleidorn from the University of Zurich proposed the question, “do people feel better about themselves when they make more money, or do people make more money when they feel better about themselves?”
The researchers accessed a publicly-available Dutch dataset, the Longitudinal Internet Studies for the Social Sciences. Data was analyzed from 4,101 adults (52% female) who provided annual reports of their self-esteem and income yearly from 2019 to 2022, roughly 56 years old on average (in 2019). Self-esteem was measured using the Rosenberg Self-Esteem Scale, and income was measured as average monthly gross income, corrected for inflation.
Bleidorn and colleagues then employed sophisticated statistical methods to separate the effects of differences between people from the effects of differences within people.
The researchers first noted a significant positive association between income and self-esteem at the between-person level. As the authors described, “a higher income relative to other people’s income relates to higher self-esteem relative to others’ self-esteem”, which is consistent with previous studies.
Following this, they discovered that income and self-esteem had a two-way relationship at the within-person level, across several years.
Specifically, individuals who earned a higher income in one year tended to have higher self-esteem relative to their average self-esteem level in the following year, and those who had higher self-esteem in one year relative to their average self-esteem level tended to earn a higher income in the next year.
However, the effect of income on self-esteem was stronger and more reliable than the effect of self-esteem on income, suggesting that income is more likely to shape self-esteem as opposed to the other way around.
Bleidorn and colleagues noted how these results strongly supported the social-indicator theory, which states that “a person’s self-esteem is a function of their social status… income shifts should lead to changes in self-esteem if income is considered a marker of a person’s interpersonal value.”
Meanwhile the findings provided weaker support for the self-consistency theory, which proposes how “people with higher self-esteem may seek out jobs consistent with their self-appraisals and potentially also pay better … [while] lower self-esteem may lead people to miss out on career opportunities that could be associated with higher income and promotion prospects.”
The link between income and self-esteem was also found to be independent of employment status and did not differ significantly across gender, age group, or education group. In other words, the link was similar for different types of people. Interestingly, this was inconsistent with previous studies.
The researchers noted some limitations. The data was sourced from a Western, educated, industrialized, rich, and democratic (WEIRD) country and may not generalize to other cultural contexts. Furthermore, the study did not include participants who reported zero income because of ambiguity in the interpretation of this response – i.e., some participants did not want to disclose their income and falsely reported their financial status.
The study, “Self-Esteem and Income Over Time”, was authored by Wiebke Bleidorn, André Kretzschmar, John F. Rauthmann, Ulrich Orth, Jaap J. A. Denissen, and Christopher J. Hopwood.