The quest for social status has been documented since the earliest writings known to humanity. The large socioeconomic disparities in China have made status seeking and relative deprivation have-nots feel in comparison to haves an important force for individual behavior and welfare change. China’s strategy of “let some people get rich first” has resulted in unprecedented uneven growth during the last three decades of economic reform accompanied by worsening inequality. There are mounting concerns that the growing inequality hinders sharing of the fruits of economic development. In addition, social unrest that accompanies worsening inequality may slow down economic transition and hinder future growth. The most recent Gini coefficient has been alarmingly high, ranging from an estimate of 0.47 to 0.61.
Meanwhile, status concern has been culturally important to the Chinese population as reflected in the traditional saying “it is better to be the head of a chicken than the tail of a phoenix”, which suggests that taking a relatively good position benefits people in the Chinese society. Status is desirable as a means that often carries the expectation of entitlement to resources. Lab experiments for multiple countries find Chinese to value status the most and even independently of monetary consequences. Some argue that the hierarchical structure of Chinese society may explain the strong status orientation. Social ceremonies, such as funerals and weddings, have been very important in Chinese culture. Though low cost burials have been national policy, rich people tend to spend lavishly on large and ostentatious tombs that irk the poor. Disadvantaged males, especially in regions with skewed sex ratios that favor women, have to pour all their resources (to throw a luxury wedding party, buy a house, pay a large bride price, etc.) as a means of signaling wealth and improving their chance of getting married.
The health consequences of low status are grave, as suggested by large scientific evidence in the fields of public health, economics, psychology, sociology, among others. For example, those of lower status have higher odds of high waist circumference and being overweight, are stressful and suffer from mental illness, are engaged more in smoking and alcohol drinking, and report poorer self-evaluated health and psychosocial health. The negative health impact explain the well-known Easterlin Paradox in China that average happiness has remained constant over time despite sharp rises in income.
Seeking for higher status diverts resources away from welfare-enhancing basic goods and spends inefficiently high on positional goods (e.g. gifts and festival spending, housing, clothing and eating out) when competition for status intensifies and social status is tied to pecuniary and non-pecuniary benefits. Rising income inequality strengthens this incentive by increasing the benefit of improving status and the toll of refusing to participate, and enlarging the entry wealth level required for high-status group. Given the limited resources, the poor have to cut basic consumption, such as nutrients intake. In rural China, studies show that children born to mothers exposed to more frequent social ceremonies during pregnancy, are more likely to suffer from malnutrition. Wasteful status seeking activities shed some light on the puzzle that nutritional status of the poor tends to be stagnant amid rapid income growth in developing countries.
Status concern promotes social competition in imbalanced markets. For example, due to the One Child Policy and son preference, China has experienced a large surplus of men in the marriage market. Men of low status in the marriage market have little chance to get married other than climbing the social ladder by sending stronger wealth signals, such as buying a house for wedding, working harder, and taking dangerous or unpleasant jobs. Studies find the skewed marriage market pressure also explain a significant part of escalating housing price, high saving rate (to invest in housing, son’s education, wedding, etc.), and large trade surplus with the U.S.
Taxation on positional consumption may cut wasteful activities and raise revenue while promoting basic goods consumption and correcting the distortion imposed by the negative externalities. In 2013 China cracked down excessive official banqueting and gift-giving in China. Sales volumes of luxury cigarette and alcohol brands have reduced substantially, which cuts booming governmental expenses and subsidizes the provision of better public goods, such as education, public infrastructure, public health services and facilities, that reduces inequality.
Status concern also indicates trade-offs for current growth promoting policies. Economic growth with larger social disparities may not lead to improved well-being as reduced relative income offsets the positive effect on own income increase. That is why harmonious growth is vital to China’s development.
Besides external comparison with others, status concern may also arise from internally evaluating oneself relative to the past or to the aspirations in the future. Since individual’s ability to change status can be limited, and Chinese society has been organized with rigid social hierarchy, public policies that provide citizens with more equal opportunities are especially important.
Dr. Xi Chen is an assistant professor of public health and economics, and of faculty of arts and sciences at Yale University. Dr. Chen is also a faculty fellow at the Yale Global Health and the Yale Institution for Social and Policy Studies (ISPS). Dr. Chen serves as a consultant for United Nations University World Institute for Development Economics Research (UNU-WIDER) and an external reviewer for United Nations Research Institute for Social Development (UNRISD). He can be reached at email@example.com.