How poor is poor? How rich is rich?

Everyone from the US Census Bureau to the United Nations has a definition of poverty. A reasonable income is unquestionably important. But income alone doesn't determine whether someone is poor. Or rich. 

By , Editor

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What defines a poor person? 

The US Census Bureau, federal agencies, state governments, the United Nations, and economists all set different numbers. But the poverty line is as individual as the people it defines. Circumstances vary, geography is a factor, family and community play a role, and everybody makes choices. 

To be poor in Central Asia or western Africa is not the same as being poor in London or Appalachia. In some cases it is better, and in some cases it is worse.  Living simply can make a person look poor to a statistician, but is that real poverty? (See Jina Moore's excellent Monitor Weekly cover story -- click here -- unpacking poverty.)

Recommended: Are the rich getting richer? Take our quiz on inequality and incomes.

You could ask the same questions about wealth as as about poverty. In Tom Wolfe’s satire on 1980s-era New York, “Bonfire of the Vanities,” the protagonist runs through his budget and shows how a $1 million salary is not enough to support his lifestyle. By most of the world’s standards, this “master of the universe” is clearly wealthy. Outside his Manhattan cocoon, he would be rich. But he feels poor. 

He suffers from a problem that money can’t solve: poverty of spirit. In other words, he is unhappy. So here’s a corollary to our cover-story question: What defines a happy person? It’s one thing to achieve basic needs, another to feel comfortable, but how much money is needed to feel happy?

You probably have a common-sense view that echoes these truisms: We all need money. But money isn’t everything. Would it surprise you to learn that social scientists have actually proved those truisms true?

According to a 2008-09 study of 450,000 Americans by researchers at Princeton University, more money doesn’t just help the poor live better lives; it helps them feel better about life. “The pain of life’s misfortunes, including disease, divorce, and being alone, is exacerbated by poverty,” the authors write. 

Increased incomes improves the conditions of the poor. But only up to a point. Above $75,000, money does not produce commensurate happiness. Chasing higher and higher income actually decreases your quality of life.

That’s because the quest for money and material comforts appears to shut off other forms of enrichment – family, friendships, hobbies, intellectual and spiritual pursuits, appreciation of nature. “The price of anything,” that guru of simplicity, Henry David Thoreau, wrote, “is the amount of life you exchange for it.”

The diminishing returns of wealth don’t just affect individ-uals. A 2010 report published in the Proceedings of the National Academy of Sciences found that, over the long run, happiness does not increase as a country’s overall income increases. In Greece and other economically hard-hit countries, unhappiness has soared – to the point of rioting – as income has plummeted. But examined over a period of 10 years or more, a nation’s gross domestic happiness is independent of rising income.

There’s still more happiness research detailed in a soon-to-be-published book titled “Happy Money: The Science of Spending,” which indicates that more money makes you happy only if you use it to buy yourself time or experiences or spend it on others.

So here’s the takeaway from our social scientists: Poverty is bad. Breaking people out of it is enormously important. But poverty is also a state of mind. As is affluence. More money makes people feel better, but only up to a point. Real happiness is tied to appreciation, to deeper pursuits, and to helping others.

Or you could say: Money isn’t nothing. Nor is it everything.

But you already knew that.

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