Chinese migrant workers' happiness is affected by both their income and income inequality in their cities. Higher income only increases happiness up to a certain point. When income inequality is high, migrant workers report lower levels of happiness, regardless of their personal income. Rural and western migrants benefit more from higher income, while high-income earners are more negatively impacted by income inequality. Migrants in less developed Western China are particularly sensitive to income inequality. Psychological factors like fairness, social comparison, and expectations play a role in these findings.