Studies have found that as income rises, happiness improves up to an income of about $75,000.
The great moral philosopher, Bo Derek, once said, “Whoever said money can’t buy happiness simply didn’t know where to go shopping.” In these difficult days of lagging post-recession economic recovery, money is a top-of-mind subject for lots of people. Many are struggling, out of work, or unable to pay their mortgages. The public discussion focuses on whether governments should or shouldn’t try to fix economies. But a recent study makes it seem that perhaps there is a public health dimension to the issue of money. Researchers from Princeton University are now saying that people’s happiness, which they define as their sense of emotional well-being, improves with income. Hardly shocking, but as you will see in a moment, part of the study results are actually quite intriguing.
Angus Deaton, an economist at the Center for Health and Wellbeing, and Daniel Kahneman, a Nobel Prize winning psychologist, analyzed 450,000 surveys filled out by Americans that were collected between 2008 and 2009 for the Gallup-Healthways Well-Being Index. The surveys included questions on people’s day-to-day happiness and overall life satisfaction. Deaton and Kahneman found that as income rose, happiness improved up to an income of about $75,000, after which the effect of money seemed to level out. According to Deaton, “Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life.”
The important point is the distinction between happiness and satisfaction. Happiness, according to the researchers, is a moment-by-moment measure of mood, whether you’re feeling emotionally together, stressed out, or blue at any given time. Satisfaction is a longer term, how-is-your-life-going kind of thing. You may be having a bad day, for instance, and so not feel happy in the moment, and yet contend that you have a good life. You may believe that your life is essentially going well (satisfaction), but wish your in-laws would move out or that your boss would join an ashram and resign (happiness). The pursuit of satisfaction, rather than short-term happiness, is the reason people devour self-help books and take up Zen. The more money you have, apparently, the more satisfaction. As for happiness, Dr. Deaton says for people who make less than 75K, “Stuff is so in your face it’s hard to be happy. It interferes with your enjoyment.”
Interestingly, an increase in income seems to have about the same effect for everyone in terms of life satisfaction, regardless of how much money they make to start with. So a 10% increase in income yields about the same increase in life-satisfaction, whether the person is making $25K or $200K.
Previous studies haven’t necessarily found the same results. A 2006 study participated in by Dr. Kahneman, for instance, showed that the expectation that people with wealth would experience good moods more frequently than poor people was an illusion. According to the researchers, “People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities.” The study looked at survey data gathered in 2004. Could it be that in the intervening years, the pressures of relative poverty have become more overwhelming and so now do impact happiness somewhat, as the latest study found?
Another recent study, published this past July by Ed Diener,professor emeritus of psychology at the University of Illinois, analyzed surveys from more than 136,000 people in 132 countries, perhaps the largest and most comprehensive global survey ever conducted, representing about 96 percent of the world’s population. That study too found that making more money correlated to people claiming to be happy. “Yes, money makes you happy — we see the effect of income on life satisfaction is very strong and virtually ubiquitous and universal around the world,” Dr. Diener says. Like the current study, Dr. Diener’s work found a discrepancy between happiness and satisfaction. “Money makes you more satisfied than it makes you feel good” says Dr. Diener. In other words, money can make you feel that your life is going well, but “it’s pretty shocking how small the correlation is with positive feelings and enjoying yourself…Positive feelings are less affected by money and more affected by the things people are doing day to day.” On the other hand, his study did notexplore the impact of money by differentiated income level, and so the effect on happiness for those in the under-$75,000 category did not show up.
Hold on, though; it gets even better.
Apparently, even to gain the satisfaction that comes from making lots of money, you need to be making more than your neighbors. According to researchers at Cardiff University the University of Warwick in Great Britain, “Our study found that the ranked position of an individual’s income best predicted general life satisfaction, while the actual amount of income and the average income of others appear to have no significant effect. Earning a million pounds a year appears to be not enough to make you happy if you know your friends all earn 2 million a year.”
As Big Brother Bob Emery sang on his show way back when I was a kid, “The grass is always greener in the other fellow’s yard.”
Now don’t get depressed. Be happy! The good news is, if you make less than your neighbors and less than $75,000 a year, that you can increase your happiness by spending what you’ve got on others. A 2008 study of 630 Americans out of the Harvard Business School and the University of British Columbia found that no matter how much money the subjects made, “those who spent money on others reported greater happiness, while those who spent more on themselves did not.”
Somehow all of this research brings me back to Maslow’s hierarchy of needs. Maslow was a developmental psychologist who studied human motivation. His findings are often portrayed as a pyramid, with the largest layer at the bottom representing basic physiological survival needs, and rising by stages to self-actualization needs at the top. According to Maslow, if the lower level needs, or deficiency needs as he termed them — physical needs, security, friendship, love, and esteem — are not met, the person will feel anxious and tense. Or to once again quote Dr. Deaton, things are “more in your face” if you make less than $75K.
Unfortunately, what the studies don’t show is how that reduced happiness affects rates of illness, depression, drug and alcohol use, and the like. From a public-health perspective, there is reason to believe that there is a strong connection between a lack of happiness and a higher incidence of disease and lack of well-being. In other words, what we’re ultimately talking about when discussing income is a public health issue. On the other hand, the chances that we as a society would actually try to provide a basic level of income to promote health and happiness, especially in current economic and political circumstances, are between slim and none. But then again, that would only cover happiness, not satisfaction — unless the government gave us more than our neighbors!