Money and Happiness: Extended Evidence Against Satiation

Introduction

Are people with more money happier? The research literature on this question is large and complex, but virtually all research agrees that more money is associated with higher happiness to at least some degree (1–12).

A key next question is how far this association extends. Is there a point beyond which more money is no longer associated with greater happiness? The answer has potential implications for financial decision-making, compensation plans, taxation, and other consequential domains.

Yet it’s a trickier question to answer than one might imagine. Historically, it has been difficult to determine the shape of the association between money and happiness because we lack data from the financially well-off. Perhaps rich people are disinclined to spend their free time taking surveys. In the enormous scholarly literature examining the association between income and happiness, almost all studies analyze a limited range of incomes, making it difficult to draw conclusions about the overall shape of the relationship. For instance, if a hypothetical study only included people earning up to $100,000/y, no matter what shape is revealed, it would be impossible to know what might have been observed if the range of incomes had been larger.

In recent research that included a substantial number of upper-income participants, I found that happiness rose steadily across the income range in a large U.S. sample (2). From low incomes up to people earning hundreds of thousand dollars per year, there was an approximately linear association between larger Log(income) and higher happiness, including both judgements of overall life satisfaction and real-time feelings.

This argues against the notion that happiness plateaus completely at a modest income threshold. But it raises a new, unanswered question: what happens beyond that? Might people earning $400,000/y or $500,000/y, for example, have reached a point beyond which more money is no longer associated with greater happiness?

Despite the sizable literature on the topic of money and happiness, I know of no studies that compare people earning something like $500,000/y to those earning much more, drawing a figurative question mark over the upper end of the economic distribution. However, there are two available reference points from high net-worth individuals, one old and one recent, that one can fruitfully compare to this trend, which may help reveal something about the trend at the high end. The present study identifies a comparable happiness measure shared across three relevant samples (a measure of overall life satisfaction) and uses it to compare the happiness trend in a large U.S. sample referenced above (the “income” group) to the happiness levels of two samples of wealthy individuals (the “wealthy” groups, Diener et al. 1985 (13) and Donnelly et al. 2018 (14)). The result is the most extensive upward comparison of money and happiness of which I am aware.

There are three potential patterns that the results could reveal.

One potential pattern is that the wealthy groups have happiness substantially lower than people earning $500,000/y. This would be a surprising result, and could have at least two possible explanations: that well-being really does plateau at some modest level of wealth or income and the happy high earners I’ve observed are anomalies, or that happiness does rise with higher income up through something like $500,000/y or more, but there is an inflection point beyond which more money is associated with a decline in happiness.

A second potential pattern is that the wealthy groups have happiness levels comparable to people earning $500,000/y. This would be consistent with the possibility that happiness does rise up through ordinary high incomes (2), but beyond that, more money is no longer associated with higher happiness.

A third potential pattern is that the wealthy groups are considerably happier than people earning $500,000/y, suggesting an upward trend that extends well beyond ordinary high earners.

Method

Participants in the income group were a sample of 33,269 employed adults living in the U.S. between the ages of 18 and 65 who reported household incomes of at least $10,000/y and who answered the Satisfaction With Life Scale (15). Responses were collected as part of a large study at www.trackyourhappiness.org. Participants answered questions about their life including the Satisfaction With Life Scale and, later, a household income question. A specific item from the Satisfaction With Life Scale, not previously analyzed in isolation, is the subject of the analysis that follows. While this is a convenience sample, its income distribution turns out to be a close match to the U.S. census.

The larger and more recent of the two high net-worth reference points comes from Study 1 in a study of millionaires by Donnelly et al. (14). The high net-worth respondents in Donnelly et al. were surveyed by a large financial institution and were selected for study based on their wealth (median net worth bracket: $3-$7.9 million). Approximately 50% of participants were from the U.S. or U.K., while participants hailed from 17 countries in total. The authors of Donnelly et al. investigated variation in wealth amongst the very wealthy and reported that greater wealth within that sample was associated with slightly but statistically significantly greater well-being. The second high net-worth reference point comes from an influential but smaller study from 1985 by Diener et al. (13) that compared wealthy respondents from the 1983 Forbes 400 (N = 49) to a location-matched control group (N = 62).

A specific life satisfaction question is shared in nearly identical form between the income group and Study 1 in Donnelly et al. In Donnelly et al. Study 1, life satisfaction was measured with the statement, “All things considered, I am satisfied with my life” with responses on a 1 (strongly disagree) to 7 (strongly agree) scale. This is virtually identical to a life satisfaction question collected in the income group as part of the Satisfaction With Life Scale: “I am satisfied with my life.” with responses on a 1 (strongly disagree) to 7 (strongly agree) scale. The Donnelly et al. question includes the preceding prompt, “All things considered” but otherwise the question wording and the scale response options in Donnelly et al. and the income group are word-for-word identical. A comparison of these two specific measures is reported in the results below (121 people in the income group did not answer this question, yielding the sample size of 33,269 mentioned above).

In Diener et al., a similar item asked participants the extent to which they were “Satisfied with your life” on a 7-level scale ranging from “Not at all” to “Extremely”. These 7-level responses were originally coded as 0 to 6 and were recoded as 1 to 7 to match the existing coding of other two measures in the results that follow.

The high net-worth individuals from Diener et al. and Donnelly et al. were not studied with experience sampling, so no direct comparison for real-time feelings is possible. However, real-time feelings and life satisfaction show essentially identical shapes of their association to Log(income) (2), so it is plausible that the results for life satisfaction in the wealthy samples generalize to in-the-moment feelings as well; additional research would be needed to test this directly.

Results

Results comparing the trend with income in the income group to the wealthy groups from Diener at al. and from Donnelly et al. across nearly-identical life satisfaction measures are shown in Fig. 1. As the figure shows, the wealthy individuals are considerably happier than the high earners in the income group. This is consistent with the possibility of a rising relationship between more money and higher happiness that extends well beyond incomes of hundreds of thousands of dollars per year. As evidenced by the non-overlapping 95% confidence intervals, the difference between the high earners in the income group and the two wealthy samples was statistically significant.

Fig. 1. Comparing results for life satisfaction across income levels to high net-worth samples of people from Diener et al., 1984 and Donnely et. al., 2018. Points represent mean life satisfaction of each group, and error bars represent the ~95% confidence interval of the mean (+/- 2 SE). The black line is a linear fit to the income group.

The magnitude of the difference in happiness between the richest and poorest people was substantial in comparison to the range of the scale. The low-income participants reported life satisfaction just above 4, the scale midpoint (e.g., the average of the 2 lowest income groups was 4.14) whereas the two wealthy groups were close to 6 out of 7 (5.77 and 5.82 for Diener et al. and Donnelly et al., respectively). Variation in income and wealth closed more than half (approximately 58%) of the gap between the not-very-satisfied low-income participants and the scale maximum. Of course, this large difference in happiness represents a gigantic difference in the financial circumstances of these two ends of the financial distribution, so even under the most optimistic assumptions money is unlikely to be associated such a large difference in well-being for most people. Still, this sizable difference offers a counterpoint to the frequent claim that money is only associated with small differences in well-being.

On a similar note, the difference between the wealthy and middle-income participants was considerably larger than the difference between middle- and low-income participants. For example, the difference in life satisfaction between the wealthy and those with incomes of $70-80,000/y (difference = 1.22) was nearly three times as large as the difference between $70-80,000/y and the average of the two lowest income groups (difference = 0.44).

It is also interesting to see that, after adjusting for inflation, the non-wealthy control group from Diener et al. (mean = 4.70) is extremely similar in happiness to the income group at a similar income level. This is consistent with the possibility that these two measures yield comparable results despite their slight differences in wording, at least within that region of the scale. And as already described above, the larger and more recent wealthy group from Donnelly et al. already shares an essentially identical happiness measure with the income group.

These results reinforce and further affirm the conclusions from Diener et al. and Donnelly et al., while showing that their results fit beautifully into a broader overall pattern relating more money to higher well-being. At a time when old results are sometimes called into question, it is reassuring to see such a consistent pattern between Diener et al. from 1985 and modern, highly-powered research.

Discussion

It might be tempting to view this ever-increasing association between more money and higher happiness as bad news. If happiness plateaued completely at a modest level of wealth or income, one might argue that this would simplify human life: Each person simply needs to get “enough” and can then rationally shift all of their attention to things besides money. The simplicity this implies may be one reason why the idea of a plateau is so attractive.

Yet the presence of a money-happiness plateau at a modest level of wealth or income would also raise at least two legitimately worrying possibilities: a failure of people to want the things that improve their well-being, and/or a failure of the economy to provide the things that people truly want (perhaps while distracting them with trivialities that make no lasting difference to happiness).

These results offer some counterevidence to these (and other) worrying possibilities, highlighting an alternative and somewhat more optimistic interpretation of the steady upward trend found here. To be clear, by “things” that money could provide, I am not referring only to material possessions, but instead to the broad range of goods and services that can be purchased, and even to the sense of freedom and peace of mind that could arise from financial abundance.

At the same time, one must also keep in mind that money is just one of many factors that help explain why some people are happier than others. It’s entirely possible that sacrificing other sources of happiness for the sake of money could lower someone’s happiness rather than improve it, even if money itself is assumed to have a positive effect.

Speaking of the effect of money, these results describe the association between money and happiness, and do not address the question of causation. However, there is evidence that having more money does indeed cause people to be happier (6, 16–18), so it is not implausible that the pattern of results described here accords with the shape of the causal relationship as well. But these results do not test the proposition directly. What they do speak against is the causal conclusion that has sometimes been drawn that, beyond some modest level, more money makes no difference to happiness, since that conclusion has itself been typically based on the shape of the association.

It is also worth noting that, while these results show an upward trend between money and happiness, the well-off groups are characterized by their wealth rather than their incomes. How income and wealth combine to explain the variation in happiness remains an open question. On a similar note, these results compare results for life satisfaction but not real-time feelings. Even if the shape of the associations between money and these two facets of happiness turn out to be the same across all levels of income and wealth, it seems likely that feelings would exhibit smaller differences than life satisfaction does here, since feelings tend to have somewhat smaller correlations with money in the first place.

Finally, it remains possible that some threshold exists beyond which more money is no longer associated with greater happiness. But if one does exist, these results suggest that it is considerably higher than incomes of hundreds of thousands of dollars per year, and potentially beyond the range of most studies that have examined the association between money and happiness in the past.

While virtually all research agrees that money and happiness are positive associated to at least some degree, there has been considerable uncertainty about whether happiness plateaus beyond a moderate threshold. Recent evidence in my own research showed a positive association in the U.S. at least up to incomes of several hundreds of thousands of dollars per year. The present results provide additional support for that trend and show that it likely extends much farther. Specifically, results from two wealthy samples exhibit significantly higher happiness than people earning over $500,000/y. The difference in happiness between the top and bottom of the economic distribution was also quite large, contrary to the notion that money is only associated with small differences in happiness. The results suggest that the positive association between money and happiness continues far up the economic ladder, and that the magnitude of the differences can be substantial.

Cite this

Killingsworth, M. A. (2024). Money and Happiness: Extended Evidence Against Satiation. Happiness Science. https://happiness-science.org/money-happiness-satiation

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