Money (still) does not buy happiness

In the past weeks since the publication of the study ?Income and emotional well-being: A conflict resolved“ I saw an increase in LinkedIn Posts stating that ?Money does buy happiness after all“, referencing this research. That statement is a blatant misrepresentation of what we can actually learn from the results of the study. And if we read the respective research, we will understand why, mostly because of one single sentence. I'll get to that sentence here in a minute. Anyhow, I took the time to read the study and the papers leading up to it, so you don't have to.

The study indeed confirms a relationship between money and happiness.

As someone who has grown up with a single mom on the bottom of the income scale, the belief that money doesn't equal happiness was an often-cited and strongly believed narrative in our household. It had to be- how else might one get through the day to day challenges of being a single mom of two small children in the 1990s of small-town Germany? And when I started getting interested in the science of happiness and wellbeing, aka Positive Psychology, most research seemed to confirm this narrative, much to my own satisfaction, and to that of my family of authors and artists. I was one of many who often referred to the very widely quoted magic number of 75,000 USD (not adjusted for inflation), the income after which more money wouldn't increase one's wellbeing according to Daniel Kahnemann and Angus Deaton. A magic number, which by the way, was still far from the imaginable for our little family of three. 11 years later, in 2021, Matthew A Killingsworth concluded in his study that happiness does rise consistently with income, even above the 75,000 USD mark. And now, published this month, the authors of two above-mentioned papers got together to solve the money-happiness question once and for all and concluded the following:

• Happiness does stop rising after a certain income threshold, but only for people who are the least happy (bottom 15%)
• Happiness increases steadily with rising income among happier people, and even accelerates in the happiest group of people (top 15%)

For example, my mom is a default-optimist and ranks very high on all individual-level measures of wellbeing (knowing such strange facts is the perk of having a positive psychologist as a daughter). So, according to the results of the present study, assuming my mom is in the top 15% of happiest people, increasing her income would have made her even happier. I wonder what she would say about that. However, someone who was a less default-happy person than my mom wouldn't necessarily increase their wellbeing with rising income and would have similar wellbeing-levels whether they earn 110k or 450k USD/year.

But doesn't that mean that money does buy happiness, at least for happy people? No. Because the relationship between money and happiness is weak- at best.

This leads me to the sentence I mentioned in the very beginning. Because the authors also note that:

?The correlation between income and well-being is much discussed, both by the public and by social scientists and has been the focus of considerable research. Yet (it) is important to note that the relationship is weak, even if statistically robust.“ (p.4) 

And there we have it. It has always been and will always be a mystery to me why we obsess so much about the relationship between money and happiness, when we know from years and years of research that other factors are so much more relevant to increasing one's happiness. Knowing that there is a relationship between money and wellbeing is interesting and surely relevant for public policy (I won't go into this here), but it has little to no value for individuals in taking steps towards increasing their wellbeing. Quite the opposite actually. The world of work is full of humans hustling their way to increasing income at the expense of so many other, much more significant, factors of wellbeing. What are those factors? 

Other happiness-factors are much more impactful than an increase in income. So focusing on income increase, at the expense of those other factors, might technically buy you unhappiness.

Well, also here a lot of research has been done and the (arguably) most commonly referenced model of wellbeing is Martin Seligman's PERMA Model. It states that there are 5 factors at play that facilitate happiness:

Positive Emotions

Engagement

Relationships

Meaning

Accomplishment

And more recently, researchers have added a 6th element to this: Health.

Depending on who you ask, you will hear different perspectives on which of the 6 has the biggest impact on happiness. In summary: They all do, and none of them are money. But Jule, doesn't Accomplishment somewhat relate to making more money? Yes and no, yes because having experiences of accomplishment in one's corporate job might be correlated to eventually also making more money. Also no, because there are a lot of other ways in life to feel accomplished, not to mention careers which don't come with regular salary increases (or no salary at all for that matter, thinking about caretakers for example) that can make you feel extremely accomplished.

Going into detail on every single PERMA element would be beyond the scope of this article, but as I'm writing this, I'm actually thinking I might do a series on this. I don't know. There is so much to write about!

What you can do with this information

Long story short: If we can all make 450k/year living a healthy, balanced worklife in which we experience more positive than negative emotions, that engages us, allows us to foster thriving relationships inside and outside work, provides us with meaning and at the same time a deep sense of accomplishment- Excellent! Although in this case, the 450k/year is the least impactful element to our happiness. 

Since the vast majority of the working population would not fall into this category, think instead about where you sit on the different happiness-factors (The PERMA Profiler could help, go to Questionnaires → PERMA → register and then you can take the test for free). Don't fall into the hedonic treadmill without noticing that neither the running or the destination will lead to the thriving (work) life you might be looking for. Instead, reflect about where your team and/or organization sits on the PERMA elements and what you can do to enable more thriving for yourself and for those around you.

My mom's take on it all

I called my mom today to tell her about the study and asked her: What do you think? It was a lovely talk in which we reflected back on our lives and my childhood. Conclusion: We didn't have money. But oh did we have happiness. That was the 1990s. Today's reality is that with shocking rates of burnout in leaders and global rates of unhappiness rising since 2007 (I recommend Gallup/Jon Clifton's Blind Spot on this point, my top 5 reads from 2022), we are facing a global pandemic of unhappiness. And the solution is not more money.

A note on the data: Both data sets are based on responses from US citizens only. Furthermore, data was collected in 2008/2009 and 2009-2015. One must be mindful about assuming that the conclusions of this study are globally applicable. I'm curious how the results would be different in 2023 in countries outside the US, say my home country Germany for example. Also remember that correlation does not mean causation.

The authors also discuss a number of methodological challenges which led to the contradicting evidence in the previous studies, which I found interesting and relevant for my own considerations of measuring wellbeing, but I have decided not to bore you with the details. Unless you are interested in the details, in which case I can absolutely find some time in the next few weeks to give an overview of the different measures of happiness out there.