×
Home Interviewers Interview Suite Premium Suite Blog Contact
ARTICLE

Is there no more happiness after $75,000?

September 23, 2019


'If you make more than, $75,000 a year, you won't be any happier.' You may have heard this claim. I first heard it in 2010.

At that time, I found the claim intriguing. I was doing my undergraduate degree, and it reassured me. I don't have to make a lot of money to be happy, I thought. Those banker hotshots are wasting their time. I rather be happy than rich.

I was naïve and cocky. I simply accepted the claim.

Fast forward seven years. In 2017, I was working in market and social research. Because of my work, I thought not only about data, but the quality of data. So I read several research papers to see what data were behind that claim. I formed an opinion and moved on. Then I forgot all about the claim.

Until this week.

I met a group of entrepreneurs and aspiring entrepreneurs at Google Campus. Someone said, 'If you make more money than $75,000, it won't make you happier.' Heads were nodding. I then remembered what I read two years ago. So permit me to share with you what I found out then …


Where does the claim come from?

It comes from a 2010 study called High income improves evaluation of life but not emotional well-being by Kahneman and Deaton.


Is that what the study says?

Not exactly. The study measured happiness in two ways.

First, the researchers asked respondents whether they felt angry, sad, worried, or stressed yesterday. Respondents answered yes or no for each emotion. The researchers then looked at the results. Let's take stress, for example. The data showed that people were less stressed as income increased. But after $75,000 it plateaued. See the red line in the chart below.



Second, the researchers asked respondents to rate the quality of their life. Respondents rated on a scale from 0 ('the worst possible life') to 10 ('the best possible life'). Here, however, there was no plateau. Every bit of money made people rate their life higher. That's the blue line in the above chart.


So what does that mean?

It means that, in a sense, every dollar you earn makes you on average happier.

You may now be wondering about other studies. What do they say?

Good question. Well, the conclusion remains intact if we consider all other studies. For example, Stevenson and Wolfers (2013: 1) analysed data from 155 countries. They looked at GDP per capita and life satisfaction. They concluded: 'The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.'


What about millionaires?

Yes, even among millionaires more money makes on average happier. Donnelly et al (2018), based at Harvard Business School, looked at the happiness of 4,000 millionaires. They found, for example, that those who make more than $10 million are happier than their poorer peers.


What are the caveats?

Of course, it is only true that more money makes you happier on average . Several caveats exist. For example, most people compare themselves to others. If you make $1 million a year but all your peers make $10 million, then it is easy to feel unhappy. If you make $100,000 and all your friends make $40,000, it is easy to feel happy.


Conclusion

More money makes you happier on average. There is no limit to it. There is no need to slack at work after you earn $75,000. Money, however, is only one factor in happiness, and sometimes we have to make trade-offs.


By Siavush Shahrizad, Founder at Poor Alexander

Bibliography

Donnelly, G., Zheng, T., Haisley, E., and Norton, M. (2018). 'The amount and source of millionaires' wealth (moderately) predicts their happiness. Personality and Social Psychology Bulletini. 44(5), 684–699.

Kahneman, D. and Deaton, A. (2010), 'High income improves evaluation of life but not emotional well-being'. PNASi. 107 (38), 16,489–16,493.

Stevenson, B. and Wolfers, J. (2013), 'Subjective well‐being and income: is there any evidence of satiation?' American Economic Review. 103(3), 598–604.

About this blog

Poor Alexander is a website that helps job applicants do well in interviews. Here we write about interviews, CVs, employment, money, and psychology. Our articles are based on the primary research we do, the literature we review, and our own experience.

Favorite posts

Why job applicants are like bank robbers

Job applicants and how to sell tomatoes

The money advice you need fits on an ...

How to win jobs and influence interviewers