Money does not buy happiness? But yes: science confirms it

Does earning more make us happier? It would seem so. Scholars from Penn and Princeton University, looking for a definitive answer, have found a stable association between higher incomes and greater happiness for most people.

Previous studies had led to contradictory conclusions: the important work published in 2010 by Daniel Kahneman and Angus Deaton of Princeton University he had found that daily happiness increased as annual income increased, but above $75,000 (about €70,000) happiness stabilized. In contrast, the work published in 2021 by Matthew Killingsworth of theUniversity of Pennsylvania he found that happiness steadily increased with income beyond $75,000.

The two research institutes have therefore joined forces in what is known as an adversarial collaboration, joining forces together with the professor of the Penn Integrates Knowledge University Barbara Mellersas referee.
In a new article of the National Academy of Sciencesthe trio shows that, on average, higher incomes are associated with ever higher levels of happiness.
Looking more closely, however, the relationship becomes more complex, showing that within this general trend, there is a sharp increase in happiness up to $100,000 a year but then plateaus.
“These results suggest that for most people, higher incomes are associated with higher happiness,” says Killingsworth of Penn’s Wharton School and lead author of the study. “The exception is people who are financially well off but unhappy. For example, if you’re rich and unhappy, having more money won’t help. For everyone else, however, having more money is associated with greater happiness, albeit to a slightly different extent.

Mellers elaborates on the latter notion, noting that though emotional well-being and income are not linked by a single relationship. “The function is different based on people’s different levels of emotional well-being,” she says. Specifically, for members of the less happy group, happiness increases with income up to $100,000, but shows no further growth as earnings increase. For those in the middle range of emotional well-being, however, happiness increases linearly with income, and for the happiest group the association actually accelerates past $100,000.

Unity is strength (of results)

The researchers kicked off this joint analysis by acknowledging that their previous work had drawn antithetical conclusions. Kahneman’s 2010 study showed a flattening pattern that Killingsworth’s 2021 study did not show.

In the current analysis, Killingsworth, Kahneman and Mellers have therefore focused on a new hypothesis according to which there is both a happy majority and an unhappy minority. For the former, they assumed that happiness continues to grow as more money comes in; the happiness of this group it improves as income increases but only up to a certain threshold, after which it progresses no further. To test this new hypothesis, they looked for the flattening pattern in data from Killingworth’s study, which he had collected through an app he created and called Track Your Happiness. Several times a day, the app asked participants a series of questions at random times, including how they were feeling on a scale of responses ranging from “very good” to “very bad.” By averaging a person’s happiness and income, Killingsworth drew his own conclusions about how the two variables are related.

A breakthrough in the new partnership came when the researchers realized that the 2010 data, which had revealed the happiness curve, actually measured unhappiness rather than happiness. Once this was recognized, the two seemingly contradictory results no longer appeared wholly incompatible. “What we found confirmed this possibility perfectly,” says Killingsworth. “When we looked at the happiness trend for unhappy people in the 2021 data, we found exactly the same pattern we found in 2010; happiness increases relatively steeply with income and then levels off: The two results that seemed utterly contradictory actually come from data that are surprisingly consistent.”

Summing up

The collected results lead to a better understanding of the relationship between money and happiness. And these findings, according to Killingsworth, have real-world implications as well. “First, they could provide information regarding tax rates or how to compensate employees. And, of course, they matter to people who are making career choices or value income higher than other life priorities,” Killingsworth says. However, she also adds that for emotional well-being, money isn’t everything. “Money is just one of the many factors that determine happiness,” she explains. «It’s not the secret to happiness, but it certainly helps».

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