For those who haven’t won the lottery and have never sold a startup to Yahoo for $30 million, science has long offered a small consolation: At a certain point, earning more money won’t make you happier. But new research debunks such feel-good claims.
There’s no end to how much happier money can make you, according to research to be published in the May 2013 edition of “American Economic Review, Papers and Proceedings” by economists Betsey Stevenson and Justin Wolfers, professors at the University of Michigan. “The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise,” the study — Subjective Well-Being and Income: Is There Any Evidence of Satiation? — concludes. “If there is a satiation point, we are yet to reach it.”
The correlation between increased income and increased happiness is no different with the rich than it is with the poor, the study finds. The “positive association between family income and reported well-being is remarkably consistent and shows no signs of petering out even at very high incomes,” the study reports. This proves as consistent when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country, Stevenson and Wolfers conclude.
Specifically, just over one-third (or 35%) of Americans making less than $10,000 reported being “very happy” and just under one-quarter (24%) said they were “very satisfied” with their lives. Of those making over $500,000, 100% reported being “very happy” and said they were “very satisfied” with their lives. Outside the U.S., Stevenson and Wolfers found the same trends. “In particular, there is no evidence that the slope flattens our beyond any particular ‘satiation point’ in any nation,” they wrote.
Why does more money mean more happy days ahead? Wolfers says he leaves that up to others to decide, but he has one theory: “It may be that the relationship is not between your income and the number of iPhones you can buy; it’s about the choices you can make.” And the more money you make, he says, the more choices open up. “But I would never say become a corporate lawyer and not work for a nonprofit if you found that more fulfilling,” Wolfers says.
Stevenson and Wolfers’s study seems to contradict work in 1974 by economist Richard Easterlin, who argued that economic and happiness data suggested a “paradox” in which increasing income after a certain point did not increase well-being. Easterlin famously wrote that people in poorer countries were happier once they could afford basic necessities. A follow-up study by London School of Economics professor Richard Layard concluded that above $15,000 per person, “higher average income is no guarantee of greater happiness.”
Easterlin, an economist at the University of Southern California, disputes the new research. “More Money does not make you happier when you look at what happens to people over time as their income trends upward,” he told MarketWatch. “If you compare people at a point in time, those with higher income are typically happier. But you cannot generalize from the point of time relationship to the relationship over time. That is what the Easterlin Paradox is all about.”
Those banking on increased wealth as a path to happiness may be disappointed in other ways: Materialistic people are less happy than those who don’t care about being upwardly mobile, other studies show. Couples who say money is not important to them score about 10% to 15% better on measures of “relationship quality,” meaning they fight less and have more stable relationships, according to a 2011 study of 1,700 married couples by Brigham Young University and published in the “Journal of Couple & Relationships Therapy.” Jason Carroll, lead author of that study, cautions, “income level is different than materialism.”
And Americans have not seen a bump in happiness since the recession. The Gallup-Healthways Well-Being Index, which has surveyed 1.7 million Americans since it began in 2008 and attempts to measure the happiness of residents in U.S. states, found almost no improvement over the past five years, despite signs that the economy is improving. The index asks respondents about well-being, physical and emotional health, work environment, and whether they worried or smiled the previous day. For the four consecutive years, Hawaii came in first and West Virginia came in last.