More money makes people happier, but not at work

This article is republished with permission from Knowledge @ Wharton, the online business journal of the Wharton School at the University of Pennsylvania, which owns the copyright to this content.

Whoever said money can’t buy happiness never saw heaps of research by economists and social scientists proving that it most certainly does. Wharton senior fellow Matthew Killingsworth adds to the pile with his latest paper, which takes the positive correlation a step further.

His study of nearly 30,000 employed adults in the U.S. found that people who make more money are indeed happier in their lives – just not while they are at work.

“When I break down the relationship between money and happiness, there’s a big situational difference,” Killingsworth said. “The more people earn, the happier they tend to be. But when they are actually at work, more money is not associated with greater happiness.”

Killingsworth has spent years measuring happiness through trackyourhappiness.org, a platform he created to gather scientific insights on the quality of human life. Participants are signalled at random times of day to report details of their experience, such as their location, activity, and level of happiness at that moment. The method, called experience sampling, is considered the gold standard for measuring the happiness people experience in daily life.

After collecting more than 1.8 million observations, Killingsworth found an unmistakable pattern. Outside of work, happiness rose steadily with income. But more money didn’t move the happiness meter while people were on the job. In fact, the higher the pay, the lower the happiness at work for most people. It’s ironic, Killingsworth noted, because higher earners tend to spend more hours at work, leaving less and less time to benefit from their larger incomes.

He offered two explanations for the results. The first is that it’s difficult to convert money into happiness at the office.

“Outside work, we can spend money on things that make our lives more enjoyable. We can go to a nice restaurant or buy a bigger TV or a better vacation. We can pay someone to mow the lawn or move our furniture,” he said. “But you can’t pay your boss to be nicer to you or buy your way out of drudgery tasks at work.”

The second explanation, also supported by the results, is what Killingsworth calls a net-zero effect: Higher-paying jobs come with a range of pros and cons that cancel each other out in terms of happiness at work. In other words, a higher income might provide genuine benefits to happiness while working, yet higher-income jobs might come with downsides that offset those benefits. A related idea dates back to 18th-century economist Adam Smith, who argued that less pleasant jobs should pay higher salaries precisely to offset their unpleasantness.

Better pay may come with more autonomy and prestige, but those jobs may also entail longer hours, greater responsibility, and more stress. “You get a net effect of approximately zero,” Killingsworth said.

What about the highest earners?

Although the study showed a flat to downward slope in the relationship between money and happiness at work for most people, there was one surprise. People who earn an annual income between $200,000 and $600,000 report the highest levels of happiness at work. They represent only the top 3% of earners in the study, and the jump doesn’t close the happiness gap with time spent outside of work. But it is a curious anomaly, Killingsworth said.

His results suggest the reason may lie in the significant control that comes with a very high-paying position. His theory is consistent with previous research that found happiness continues to grow with income.

“The new hire doesn’t get to stay home with their kids when they need to, but the new boss might,” Killingsworth said. “There are a lot of ways that being at the top of the pecking order gives you a bit more control. It’s a perk that comes with the corner office.”

Household income and happiness

The study also found that nonpersonal income was positively related to happiness during both work and leisure time. To understand this, Killingsworth said, consider a household's total income. Once total household income was held constant, a smaller fraction of household income was associated with increased happiness at work, while a larger fraction was associated with decreased happiness at work.

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Killingsworth posits that the money a person does not earn themselves can provide the benefits of money without being bundled with the headaches of a higher-paying job. Think of a higher-earning spouse whose salary alleviates the income burden for their lower-earning partner, or a parent whose income covers an adult child who works but lives at home.

“In other words, the more your spouse earns, the better your own work life tends to be,” he said.

Why happiness at work matters

Killingsworth’s study does more than quantify feelings of happiness. He said the results convey useful information for those seeking more joy in their lives. He encouraged people to think about how money and happiness correlate for themselves and to consider a realignment if they are out of balance.

“A lot of people have a false idea, a silver-bullet theory of happiness. If I just have more money, everything will be better. Perhaps your life outside work will be a bit better, but your work likely won’t,” he said. “If you want to be happier at work, you have to look for other ways to improve it.”

Learn more: The six key ingredients in Dr Tim Sharp's recipe for happiness

There’s also a message for managers. Killingsworth said his study expands research that shows happier people perform better at work. If greater happiness at work produces higher performance, and higher pay doesn’t improve happiness while people are working, then you likely need to consider ways of boosting happiness at work beyond pay. He urged business leaders to explore ways they can improve their employees’ lives and, especially, their experience at the office.

One idea everyone might consider is striking the right balance between a higher income and longer work hours. “Earning more money appears to make Saturday happier but not Wednesday afternoon,” he said. “The more money people earn, the longer their hours tend to be. If you want to experience the benefits of a higher income, you need to have time to enjoy it.”