From a young age, we are told to work hard to find a well-payed job, as to be able to live a fulfilling life. However, there is no set rule for how much money it takes to be happy, although, we as a society have a general understanding of the value of a humane standard of living. Economists, psychologists, and sociologists all over the world have published articles and conducted studies to find some clues for one of the most debated questions of the modern world, with relevance to individuals making trade-offs between income and other life goals, employers determining wages for employees, and institutions influencing economic policy.
So, how much should I earn to be happy?
Initial findings suggested the presence of a threshold to the income that guaranteed the greatest happiness.
Nobel prize-winning psychologist Daniel Kahneman first described the change point where extra income begins to matter less for happiness: his study, conducted in 2008 in the USA, revealed that there is no further progress in happiness beyond an annual income of $75,000.
Indeed, high income can “buy” a person a satisfactory life, but not necessarily happiness. The slight difference between these two measures can be explained by emotional well-being and life evaluation; the first refers to the emotional quality of an individual’s everyday experience, while life evaluation refers to the thoughts people have about their life in general.
While life evaluation rises steadily with income, emotional well-being tends to stop at an annual income of approximately $75,000.
Boundaries of the Problem
The article “Can money buy happiness?”, published in The Guardian in 2016, tries to explain the reasons why too high incomes can lead to a less happy life.
Money seems to be the greatest source of anxiety for people, both having too much or too little.
When we have enough money to cover our basic needs, an extra amount doesn’t provide as much happiness as doing other activities, such as growing significant relationships or doing charity.
A possible implication is that, beyond $75,000/y, money is just a way of “keeping score” in life, and there might be little reason to care about further increases in income as far as one’s day-to-day experiences are concerned .
As Markus Persson tweeted, after selling his game “Minecraft” to Microsoft for £2.5bn, “Hanging out in Ibiza with a bunch of friends and partying with famous people, able to do whatever I want, and I’ve never felt more isolated.”
So, as many of the readers are now thinking, we need to reach at least an annual income of $75,000 to experience the perfect amount of happiness, right?
A recent study states the opposite, at least if you live in a more egalitarian country with a stronger middle class than the USA, such as Australia.
Data from Melbourne Institute show interesting insights: it appears that over the first two decades of this millennium, more and more Australians’ happiness has become dependent on their income, despite high life satisfaction ratings and stable income inequality across households. In fact, the mean happiness of Australian has declined every year since 2012 despite stable earnings, raising the income change point where it no longer strongly affects happiness.
Evidence shows that this limit has almost doubled in 20 years, even after adjusting data for inflation and cost-of-living increases.
Another study, published in 2021 by the researcher Matthew Killingsworth, takes further this thesis by examining 1,725,994 experience-sampling reports from 33,391 employed US adults.
The investigation used smartphones to collect real-time reports, that randomly prompted the participants over waking hours to answer questions about their experience at that moment.
In this new sample, there was no evidence of an experienced well-being plateau above $75,000/y: experienced weel-being and life satisfaction actually rise linearly with (logarithmic) income.
Moreover, the only negative feelings to grow with earnings were stress and anger, while others tended to decrease.
The article concludes that “While there may be some point beyond which money loses its power to improve well-being, the current results suggest that point may lie higher than previously thought” .
It emerges that recent articles are inclined to disprove the myth of the “happiness amount” fixed at $75,000/y; today, people are more likely to be happy if they keep raising their earnings.
It is fair to ask if these results are a recent trend, where human greed is fueled by information faster than ever and forces individuals to compete amongst one another.
Nonetheless, we must address that when comparing income and happiness in general, there are countless other variables to consider. According to psychologist Sonja Lyubomirsky, about 50% is down to our personal baseline happiness level (in other words, some people are happier than others), 40% regards “intentional activities” and things we can do to make ourselves happier, and only 10% is given by life circumstances, which would include income level .
We can deduce, given the abovementioned, that money is not the secret of happiness, but can be a solid basis to contribute to a happier life.
High Income Improves Evaluation of Life but Not Emotional Well-Being – PNAS. https://www.pnas.org/doi/10.1073/pnas.1011492107.
“Can Money Buy Happiness?” The Guardian, Guardian News and Media, 7 Jan. 2016, https://www.theguardian.com/money/2016/jan/07/can-money-buy-happiness.
Richard Morris Research scientist, and Nick Glozier Professor of Psychological Medicine. “Why Happiness Is Becoming More Expensive and out of Reach for Many Australians.” The Conversation, 3 Apr. 2023, https://theconversation.com/why-happiness-is-becoming-more-expensive-and-out-of-reach-for-many-australians-170877.
Experienced Well-Being Rises with Income, Even above $75,000 per Year – PNAS. https://www.pnas.org/doi/10.1073/pnas.2016976118.