New research published in the Proceedings of the National Academy of Sciences Journal suggests that money does appear to boost happiness, at least up to earnings of $500,000. The research was conducted by Nobel Prize-winning economist Daniel Kahneman, alongside researchers Matthew Killingsworth and Barbara Mellers, both from the University of Pennsylvania. The study aimed to resolve a dispute between Kahneman and Killingsworth’s conflicting findings on the topic.
In 2010, Kahneman published a study with fellow Nobel Prize-winner Angus Deaton, which found that money could only boost happiness up to a point, approximately $75,000 in annual earnings. This notion became popular, leading Dan Price, the founder of credit card processor Gravity Payments, to boost the minimum salaries of his employees to $70,000, cutting his own salary to do so. The move brought him praise as an innovator and business leader in the process.
Improved happiness with higher earnings
However, the new study contradicts the earlier research, indicating that for most people, happiness does improve with higher earnings, up to $500,000 a year. The researchers found that most people’s happiness rises linearly with income, while about 30% of people experience accelerating well-being once their earnings rise above $100,000.
The research could have implications for tax policies or compensation strategies, according to Killingsworth. The study noted that participants above the $500,000 income level were “quite rare,” providing a lack of comprehensive data for that group.
However, the research did find a smaller group of people, comprising approximately 15% of individuals, for whom higher incomes do not make much of a difference. This “unhappy group” experiences a different relationship between happiness and income, with additional money failing to improve their sense of well-being once they’ve hit $100,000 in annual earnings, according to the study. The researchers posit that these people may be suffering from life events that overwhelm any improvement that money might bring.
“This income threshold may represent the point beyond which the miseries that remain are not alleviated by high income,” Kahneman, Killingsworth and Mellers wrote. “Heartbreak, bereavement, and clinical depression may be examples of such miseries.”
The study, however, does not suggest that money can solve all problems, and other research into the science of happiness has found that other aspects of life, such as community and hobbies, have a measurable impact on contentment.
“Money is just one of the many determinants of happiness,” said Killingsworth. “Money is not the secret to happiness, but it can probably help a bit.”
The research was conducted using a process called “adversarial collaboration,” where researchers with conflicting findings seek to resolve their dispute through joint research. In this case, Kahneman paired up with Killingsworth after the latter’s research contradicted his 2010 findings.
The researchers asked 33,391 working U.S. adults with a median household income of $85,000 to answer questions about their sense of well-being.
The study suggests that the relationship between happiness and income is more complex than previously thought, with different income thresholds for different people. The research indicates that, for most people, money does appear to boost happiness, up to a certain level. Beyond that level, the relationship between happiness and income varies, with some individuals not experiencing any additional improvement in their sense of well-being.