A new study – conducted by researcher Matthew Killingsworth from the University of Pennsylvania – flies in the face of previous research that found people do not experience any significant changes to their levels of happiness after they start earning more than $75,000 (R1.1 million) a year.
The previous study, published by Nobel laureates Angus Deaton and Daniel Kahneman, surveyed 450,000 Americans in 2008 and 2009 about their household income, emotional state during the prior day and overall feelings about their life and well-being.
Broadly, it found that the relationship between income and levels of happiness were not greatly tied together after earning around $75,000 per year. For incomes below $75,000, larger incomes were associated with greater experienced well-being, but beyond $75,000, there was no further improvement.
Interpretations of the study’s findings posit that incomes below $75,000 allow people to satisfy basic needs, leading to improvements in daily experiences; but after that point money just becomes a means of “keeping score” and provides no big leaps in improved happiness.
The latest study from Killingsworth, however, finds otherwise.
Using smartphones to track real-time reports of experienced well-being, and examining this relationship with household income levels in the US, Killingsworth’s study amassed data from over 33,300 employed adults, tracking 1.75 million ‘experience samples’.
Plotted onto a graph, the study’s findings were quite the opposite to the Deaton-Kahneman paper – specifically that happiness, life satisfaction and well-being continued to rise quite linearly with household income levels, far beyond the $75,000 threshold where the Deaton-Kahneman study showed a plateau.
Across 12 ‘feelings’ tracked in the data, the study found that larger incomes are associated with higher levels of positive feelings, and significantly lower levels of negative feelings. For low incomes, the inverse was true.
While drawing different conclusions, the studies do have some similar findings.
Specifically, Killingsworth said that the results show that well-being rose linearly with logarithmic income – not raw income. For example, this means that two households earning $20,000 and $60,000 would show the same difference in happiness as two households earning $60,000 and $180,000.
Put simply, “marginal dollars matter less the more one earns,” Killingsworth said. A $10,000 improvement would make a $20,000 earner far happier than a $120,000 earner – but both households would still feel happier.
Why the difference?
Killingsworth said the large difference between the findings of the two studies comes down to the data collection methods.
The Deaton-Kahneman study required surveys asking participants to think back on moments in time and aggregate how they were feeling on any given day or week.
“At the extreme, this leaves open the possibility that, despite its association with remembered feelings, income could have little or no association with people’s actual experienced well-being as they live their lives,” Killingsworth said.
“Remembered feelings might also introduce noise or forms of bias that artificially mute its association to income, such that actual experienced well-being could have a stronger association to income.”
The true relationship between income and experienced well-being could therefore be considerably stronger or considerably weaker than currently thought, and a plateau might exist at a different income level or not exist at all, he said.
The Killingsworth study, meanwhile, tracked well-being in real time and is thus more indicative of experienced happiness, rather than remembered happiness.
Another difference could be the scaling of the two studies – where the Deaton-Kahneman study determined the threshold and grouped participants more generally over the $75,000 level. The new study has a more continuous scale.
“Taken together, the current results show that larger incomes were robustly associated with greater well-being. Contrary to past research, there was no evidence for a plateau around $75,000, with experienced well-being instead continuing to climb across the income range.
“There was also no income threshold at which experienced and evaluative well-being diverged; instead, higher incomes were associated with both feeling better moment-to-moment and being more satisfied with life overall.
“While there may be some point beyond which money loses its power to improve well-being, the current results suggest that point may lie higher than previously thought,” Killingsworth said.