Previous studies on the determinants of subjective well-being all concur on the importance of relative income, i.e. individuals’ subjective well-being to a certain extent depend on how well they are doing in relation to their reference group. Using South African data from 1993, Kingdom and Knight (2006 & 2007) find that in apartheid South Africa, reference groups are mostly divided along racial lines, i.e. a person’s relative income within his/her specific race group is significantly correlated with his/her subjective well-being. In this paper, we explore whether these reference groups have shifted in post-apartheid South Africa, using data from the 2008 National Income Dynamics Survey.
We find that race-specific relative income is no longer significantly correlated with subjective well-being. However, we find that both individuals below and above the poverty line now regard perceived relative income as an important determinant of their subjective wellbeing. While society was greatly divided along racial lines prior to 1993, subsequent to 1994 greater racial integration took place and one would therefore expect the relevant comparison group to include individuals from all race groups. The findings from this paper support this proposition.