￼Dan Price of Gravity Payments recently announced that he raised his minimum wage for all his employees to a whopping $70k per year. At first, this move sounds like an over zealous CEO showing off his money in order to buy the best talent around, much like the New York Yankees, a strategy which has proven successful. However, he based his actions on a 2010 Princeton University study of income and its relationship to happiness. As a soon-to-be graduate looking for a job, I became more than a little interested in delving deeper into this study. I had heard of the study previously, but I didn’t really understand the basis of the study nor why it yielded the results it did.
The following is an extremely simplified overview of the study and its findings. Regardless of one’s own situation, one thing a person needs to keep in mind is that each individual is ultimately responsible for his and her own happiness.
The study looked at two different aspects of happiness: life evaluation and emotional well-being. Life evaluation refers to the overall satisfaction with one’s entire life. Emotional well-being refers to the emotions one experiences on a day-to-day basis. In other words, it refers to the stress, sadness, happiness, and other emotional responses that one tends to feel throughout the course of a day. While examining the study, and relative to my current situation, I found the aspect of emotional well-being to be the more relevant and more accurate gauge of happiness. Life evaluation can be subject to a phenomenon called fade-effect bias where humans tend to more easily forget negative experiences and better remember positive experiences.
In short, the study found that $75,000/year is the level at which people tend to stop experiencing any additional happiness relative to additional income. This study is also relative to the cost of living within the United States. “$75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure”(Study). In other words, the stresses associated with making more that $75,000/year may counteract any additional happiness attributed to the additional income, essentially canceling each other out.
On the other hand, “less money is associated with emotional pain.” Essentially, as people increase their income they are more able to cover basic needs of living: food, shelter, living expenses, etc., which inversely decreases stress and worry that are associated with being unable to cover essential needs. As income continues to increase, comfort aspects can be addressed, up to being able to afford “luxury” items.
Ultimately, this is not a perfect science. Whether one makes more or less than $75,000/year, is not the tell-all sign of happiness. Many people with variously different income levels are perfectly content with the lives they live. But this study provides a good basis to better understand how income and happiness are related. Not that we don’t understand already a great deal about how that relationship works, but this is a particularly interesting study that suggests that, maybe, we all don’t need to win the lottery, or make a CEO’s salary, in order to be happy.