Myth; Wage = Happiness: Illusion; Perfect Salary for Workers: Dubious Correlation; Money Alone Motivates Workers…

Perfect salary means happiness: Conventional wisdom has it that when people are paid more; they are happier, and they work harder… But like most conventional wisdom this one is rooted in fact and requires: ‘Yeah but’ expression…

According to Hal E. Hershfield; Yes, money does  matter, but it depends on what you mean by ‘matter’… You may be more satisfied at work if you make more money, but this doesn’t necessarily mean that you will be happier: Happiness and satisfaction are simply different things. Being in upper echelon of income rankings won’t necessarily put you in upper echelon of happiness scale.

According to Alan B. Krueger and Daniel Kahneman; while most people believe that having more income will make them happier, the researchers have found that the link is greatly exaggerated and mostly an illusion… Although income is widely assumed to be a good measure of well-being, the belief that high income is also associated with happiness is widespread but mostly illusory… However, despite the weak relationship between income and happiness, many people are still highly motivated to increase income thinking they will be happier…

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According to Professor Glenn Firebaugh; ‘relative income’ is a better predictor of happiness than ‘absolute income’… Experiments suggest that what matters most is not income per-se but income relative to the income of one’s peers; people tend to compare themselves to others of the same age resulting in a hedonic treadmill, because incomes rise over most of the adult lifespan… Rather than promoting overall happiness, continued income growth promotes an ongoing consumption race where individuals consume more and more just to maintain a constant level of happiness…

According to Kahneman and Deaton; higher income is neither the road to happiness nor the road to the relief of unhappiness or stress, although higher income continues to improve people’s life experiences… So money can’t make you infinitely more joyful, but it might be able to make  you infinitely more content…

In the article Is $50,000 Enough to Buy Happiness? What About $161,810? by FastCompanyStaff writes: According to a ‘Skandia International’ poll; $161,810 is the annual income you need to make to be happy; or maybe its $50,000, if you believe a Marist poll; or it’s $75,000, says a Princeton study. Don’t be misled: The role income plays in happiness is rife with conflict:

  • Myth 1: SALARY = HAPPINESS: If you ask someone how many cookies she’s eaten and then ask how happy she is, she’ll answer based on the cookies. Same with how much money she makes. It’s called the ‘focusing illusion’, and it skews polls like these… Be happy: The Marist and Princeton polls correlated people’s happiness and their income. The other asked people how much money they would need to be happy– and it was a lot. That goes to show: Take your focus off the money, and suddenly happiness becomes a lot more affordable…
  • Myth 2: Lifestyle Upgrades: ‘Hedonic adaptation’ is a psychologist’s way of saying ‘the novelty wears off’… Pretty soon that smart TV you were saving up for is going to become just another thing you own. It’s the same with achieving the income you’ve had your eye on: Your lifestyle adapts, you are back to wanting more… Be happy: Focus on experiences– good friendships, interesting vacations– and less on actual things. Compared to fancy things, psychologists say; happy memories are adaptation proof…
  • Myth 3: Communities are Supportive: The critic H.L. Mencken once wrote that wealth is ‘any income that is at least $100 more a year than the income of one’s wife’s sister’s husband.’… Richard Easterlin proved that relative income trumps personal income when it comes to happiness… Be happy: Focus on your own achievements. If you need help, try tweaking your social media feed; one person’s celebratory tweet can be another’s anxiety spike. Were we once easier to please? Yes: In 1963, 40% of Americans making less than $3,000 a year ($22,000 in today’s dollars) declared themselves very happy and 59% of Americans making $15,000 ($112,500) or more said the same. By 2004, only 22% of Americans who made less than $20,000 ($24,300) said they were very happy, as did only 43% of those making $90,000 ($109,400) or more…

In the article Perfect Salary for Happiness is About US$75,000 by Megan Levy writes: The perfect salary for happiness is about US$75,000 ($98,800); that’s according to a 2010 Princeton University study, by Angus Deaton and Daniel Kahneman, who came to the conclusion that, up to a point, money certainly can buy day-to-day happiness, but giving people income beyond US$75,000 is not going to do much for their daily mood… but it will make them feel like they have a better life…

And that study motivated Dan Price, CEO of a U.S. company with 120 employees, to astonishingly slash his own million-dollar salary and bump up those of his employees to a minimum of US$70,000… Price said he would pay for the wage increases by cutting his own salary from nearly US$1 million to US$70,000, and by using 75 to 80% of the company’s anticipated US$2.2m in profit… According to Ryan Pirkle; company spokesman; current average salary at the company is US$48,000 year…

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In the article Perfect Income for Happiness? It’s $161,000 by Robert Frank writes: More than one study has tried to determine the financial price of happiness. Some look at wealth and others look at income… Happiness itself is not easily defined and money does not always guarantee it… The financial considerations for happiness usually depend on various issues, e.g.; geography, peer groups, education, other external factors…

According to Skandia International’s Wealth Sentiment Monitor; it found that the global average ‘happiness income’ is around $161,000 for 13 countries surveyed, and there was a wide range of answers depending on the country, for example; Dubai residents need the most to feel wealthy– they needed $276,150 to be happy… Singapore came in second place, with $227,553, followed by Hong Kong with $197,702…

The region with the most modest needs for happiness is Europe; Germans only need $85,781 to be happy, placing them lowest on the list; the French need $114,000, while the British need $133,000… The survey doesn’t ask about total wealth needed to feel happy, but it does ask about the amount of wealth needed to feel ‘wealthy’… Globally, the average amount needed to feel wealthy was $1.8 million…

Singaporeans took the lead on the ‘wealth’ needs with $2.91 million needed to feel wealthy, Dubai ranked second with $2.5 million, followed by Hong Kong with $2.46 million… Surveys show that Americans, mostly say they need $1 million or more to feel wealthy… All of this shows that wealth and financial happiness is not an absolute number, but is relative to your peers, surroundings…

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In the article Income & Happiness Studies: How much is Enough? by G.E. Miller writes: Question: At what $ amount can money no longer buy happiness? There are a number of studies that have attempted to answer this question by pinpointing a magical income number at which happiness is much easier to obtain…  Are these Money and Happiness Studies Legit? I always find these money and happiness studies interesting, but they always leave me with a bit of a ‘hungry-for-more’ feeling. I am always left questioning three things:

  • Causation vs. Correlation: Perhaps confidence, location, gender, race, education level, or even age is a bigger determinate of happiness than income? A correlation between income level and happiness does not mean that the income level led to the happiness, for example; even though the U.S. is a wealthy nation, it’s citizens are not the happiest…
  • Impact of Location: How does location impact happiness at different income levels? $50,000 will take you a long ways in Fort Wayne, but not very far in San Francisco. You can’t paint a broad brush across the entire U.S. when expense levels can vary so much by geography. What is the magic number when adjusted for cost of living?
  • Impact of Expenses: How do spending habits influence happiness? Is someone who spends much more than peers in their geography less likely to be happy?

What Can You Learn From Income and Happiness Studies? Despite their weaknesses, I think that these studies do help add some credibility to the following assertions:

  • Meeting basic needs does influence happiness: Just scraping by to put food on the table and pay for other basic needs is going to have an adverse impact on your happiness; and the numbers in these studies back this assertion…
  • Stuff does not equal happiness: At a certain level, more buying power (more stuff) does not lead to more happiness. Therefore, if happiness doesn’t increase infinitely with income, one would have to assume that stuff does not lead to more happiness: So stop buying all that stuff!
  • Take comfort in enough: The pursuit of money for the goal of increasing happiness is something that most people buy into. As a wage earner, take comfort in knowing that you don’t have to earn all that much to influence your happiness…

The idea that happiness is important to society is not new: Many other prominent intellectuals, philosophers and political leaders throughout history, including; Aristotle, Confucius, Plato… incorporated happiness into their work… Thomas Jefferson put the ‘pursuit of happiness’ on the same level as life and liberty… Jeremy Bentham believed that public policy should attempt to maximize happiness, and he even attempted to estimate a ‘hedonic calculus’… It may come as a surprise but money really doesn’t bring happiness to people.

According to Jade; It does bring satisfaction and even a temporary happiness, but in the long run happiness doesn’t have a price tag. Earning more money can lead people to want more money and being surrounded with people who are well-off can lead to aspire to better standard of living, but it does not guarantee happiness…

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According to Shawn Achor; nearly every company in the world gives lip service to the idea that ‘people are their greatest asset’… Yet according to Conference Board Survey; employees are the unhappiest they have been in 22 years of tracking job satisfaction rates… Given the unprecedented level of unhappiness at companies and the direct link between the employees’ happiness and business outcomes, the question is NOT whether happiness should matter to companies:

The real question is: What can companies do to raise the happiness level of employees? Just increasing salaries in the hopes of encouraging greater happiness can backfire… What works for one worker may not transfer to other employees in the same manner, for example; while one worker may increase productivity when given more pay, another worker is motivated more by the recognition of their ‘value’ to the company…

Overall, to effectively motivate workers and raise their level of happiness, companies need to employ a set of tools that provide fair and equitable salaries, while also placing emphasis on non-monetary rewards, e.g.; providing an empathetic work environment, providing training, opportunities for advancement, open communication, security… all balanced with a managerial style that encourages both loyalty and higher productivity…