For decades, economists have debated when money makes us happy.
If we start with the Easterlin Paradox (1974), we can say, “It depends.” Once basic needs are satisfied, more income beyond $75,000 brings no more happiness. However, the numbers can vary. In another paper (2010), Nobel laureates Daniel Kahneman and Angus Deaton concluded that we plateau somewhere between $60,000 and $90,000. As income rises to as much as $90,000, we get happier. After though, earning more, we feel no better. Then, further complicating the answers, we’ve had a University of Pennsylvania researcher reporting that more income correlated with more happiness. Using his “Track Your Happiness” app, Matthew Killingsworth had participants express how happy they felt at random times during the day. When the app “pinged,” they had to answer questions that included their position on a “very good” to “very bad.” feelings scale.
Now there is still more.
Money and Happiness
Continuing his research, Dr. Killingworth collaborated with Nobel laureate Damiel Kahneman and Barbara Mellers by observing two cohorts: a happy group and those that are unhappy. The happy people continue feeling better as their wealth ascends. But the sadder individuals are positively affected until annual income hits $100,000. And then, they are the ones that plateau.
Or, as Dr. Killingsworth explained, “…if you’re rich and miserable, more money won’t help. For everyone else, more money was associated with higher happiness to somewhat varying degrees.” Adding more detail, the arbiter of the study said, “…For those in the middle range of emotional well-being, happiness increases linearly with income, and for the happiest group the association actually accelerates above $100,000.”
From here, we can leap to a survey that gives us the numbers (if we agree that 2,000 people is a representative sample).
The Empower Survey
Wealth
What we own minus what we owe is our wealth. What we own could be tangible like a house or intangible like stock or our savings.
Revealing a massive gap, Gen Z says a lot less wealth will bring them happiness than Millennials:
Income
Whereas we select a certain moment to calculate our wealth, earnings are a flow.
Like their wealth, Millennial happiness depends on earning more than Boomers, Gen Z, and Gen X:
Our Bottom Line: At the Margin
Economists like to say that they are always observing the margins in our lives. As the (imaginary) line where we do more or less of something, the margin locates our decisions. When we decide to sleep for an extra hour or drive faster than the speed limit, we are at the margin. Similarly, when businesses pay us more or governments plan a budget, they are thinking at the margin.
And yes, also at the margin, together, money and happiness can grow.
My sources and more: Thanks to Slate Money for alerting me to the new Harris/Empower poll. on money and happiness. From there, CBS News had a summary and then state-based data. However, for the research, this recent paper is the most up-to-date.
Please note that today’s post is an update. It includes several paragraphs that were previously published.
