The Privileged Question of Whether Money Buys Happiness

For all of time, or at least for the time that monetary exchange has existed, we have been asking ourselves this question: Can I buy happiness with this money? Or, if I were to acquire more money, would that make me happy?

Economists love this question. A well-known study pegged happiness at a salary of $75,000. Justin Wolfers notes that wealthier people are happier than poorer people, and, as a whole, wealthier countries are happier than poorer ones. And he recently told TIME that, duh, being able to make a living makes you (made him) happy:

What about the personal implications of your research? Are you happier now that you make more money than you used to?

Unquestionably, yes. When I was in graduate school and I went into a store, I was always looking at the prices. I was constantly calculating. You ask yourself, “Can I afford to buy this box of cereal?” You think, “If I buy more of this, maybe I can afford less of that.” You’re making these tradeoffs and you’re constantly aware of these ­tradeoffs. And it’s tiring.

The first thing I did when I had a well-paying job is I stopped looking at those price tags. Now I never really feel stressed about money. Even if I lost my job tomorrow, I have my degree, and I can get another job. I get to live free from stress and worry and the constant calculating of tradeoffs that I had earlier in my career.

And we’ve seen this recently with the casino workers who suddenly found themselves earning a living wage:

“To be honest with you, at the end of the day, I have pride knowing that I can pay my own bills,” said one worker. “I’m 51, and ever since I got this raise my life has been so much easier,” said another. “When you have a living wage, you don’t get paid and think: do I buy food this week?”

So the question of whether money buys happiness is really a question that comes from a position of privilege. Like Wolfers, I don’t feel stressed about money. If I were to lose my job, I could just get another one. Earning more money at this point would allow me to do things like pay off my parents’ mortgage, which would undoubtedly make them happy and as a result of their happiness make me happy, but just marginally so compared to those who go from worrying about buying enough groceries for the week to not worrying about having food anymore. Here’s Wolfers again:

Back to your research: Is the relationship between money and happiness linear? Will I feel the same jump in happiness with each $1,000 raise?

No. If you think about how much extra well-being is associated with each dollar, it’s absolutely a situation with diminishing returns.

If I got a $1,000 raise today I’d put it in a savings account, wouldn’t think about it much and would go on with my day. So it really is a situation with diminishing returns.

Photo: Kate Ter Haar