7
The naked paycheck
A group of friends break the pay taboo and bare their salaries.
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It's Friday -- payday for some of us -- and the last day in our Payday series. This week, the Wealth and Poverty Desk has been untangling some of the mysteries of pay in America.
The assumption about pay is that we all want more of it. Who ever asks the boss for a decrease? But there's research suggesting that beyond a point, a bigger paycheck is not always better.
A recent Princeton study found that more money doesn't make you happier once household income hits $75,000 a year. That same study also looked at life satisfaction, and in that case, there was no upper limit. The bigger your income, the more satisfied you feel about your life as a whole.
I tested out the theory with Jennifer Creswell, an Episcopal priest in Portland, Ore., who wrote to our Public Insight Network that she'd often "fantasized" about inviting friends over to talk about how much they make and their priorities for spending, sharing, saving. And she did just that, hosting a party with her husband Ian Doescher and four other friends to discuss and bare their salaries.
Here are some of the highlights:
"I was thinking of you all coming tonight. And I was thinking, like imagining, um, that we were all going to get naked together," Creswell said. "And I was thinking am I actually gonna do it? Am I actually going to share what I make?"
Another Episcopal priest, Shana McCauley, revealed her household income: "We together make just under $65,000...I feel like we're pretty low middle class. We're middle class because we have expendable income, but we've just been going through our bills and it doesn't look good."
Doescher, who works in marketing, said he often felt his paycheck should be bigger during boys' night out with his buddies. "I pretty much assume they all make more than I do. I honestly think that hanging out with them more since we've moved back to Portland was one of the things that made me think: I should be making more." He opened up about his and Creswell's salary: "We probably make...about $106,000 a year."
Shana's husband Ryan responded: "Well, I think it creates a little separation. You know, knowing that you have more means than we do and so we're not there yet. We've been trying to kick it together to buy a manufactured home and that's like our big dream right now but that seems like so far off. But on the other hand it still makes you human. You're not superhuman. You're not making millions of dollars a year."
Listen to more of the conversation in the full audio above.
We reached out to our Public Insight Network and asked "Are you comfortable telling others how much money you make?" We broke down the answers and data:
Share your stories with us.
Tess Vigeland: It's Friday. Payday for some of you, and the last day in our Payday series.
This week, the Wealth and Poverty Desk has been untangling some of the mysteries of pay in America. The assumption about pay is that we all want more of it. Who ever asks the boss for a decrease? But there's research suggesting that beyond a certain point, a bigger paycheck is not always better.
Marketplace's David Brancaccio reports on a group of friends who gathered to hash out what they really want out of their paychecks.
David Brancaccio: It's my kind of dinner party: nudity and salary, all-in-one.
Jennifer Creswell: I was thinking of you all coming tonight. And I was thinking, like imagining, um, that we were all going to get naked together.
And that's a priest talking.
Creswell: And I was thinking am I actually gonna do it? Am I actually going to share what I make?
Jennifer Creswell, Episcopal priest in Portland, Ore., and her husband Ian Doescher, who works in marketing, have invited four friends on a summer night to see if anyone might bare their salary. We'd asked our audience via our Public Insight Network about salary and happiness. Creswell wrote back she'd often "fantasized" about inviting friends over to talk about how much they make and their priorities for spending, sharing, saving. Which sounded like a fine idea.
Ryan McCauley: I've been broke for a long time. I know how to live broke.
Shana McCauley: We're VERY GOOD at broke!
Ryan McCauley works at a Boys' and Girls' club. His wife Shana is a second Episcopal priest here. We'd sent a link to a Princeton study that found that more money doesn't make you happier once household income hits $75,000 a year. It's when that $75,000 comes up that Shana and Ryan become the first couple to bare their paychecks.
Shana McCauley: It's not much actually. We together make just under $65,000. I did it! I broke the barrier! I feel like we're pretty low middle class. We're middle class because we have expendable income, but we've just been going through our bills and it doesn't look good.
Ryan McCauley: We're high-low class.
Jennifer Ott is a pastor in the United Church of Christ. She reveals her household income is $57,800 while her partner Hillary is in graduate school.
Jennifer Ott: It would be nice if we had more. I don't know if $75,000 would be the magic number, but we still have enough.
Kinda. Just barely.
Ott: It's been nice to also live off the generosity of friends, like you guys, who've said "Hey we have storage for you" so you don't have to pay $150 a month for a storage unit while we live in a 500-square-feet trying to save money.
The Princeton study found that happiness peaks at $75,000 by studying people who'd been asked "How happy were you yesterday?" But that same study also looked at life satisfaction. And in that case, there was no upper limit. The bigger your income, the more satisfied you feel about your life as a whole. Dinner party hosts Jennifer and Ian say their compensation is rising, but they don't feel more or less satisfied or happy.
Creswell: We expand into our new salary very easily.
We've been hearing folks at the party thinking about income in terms of what it buys you. But experts say there is another way:
Daniel Ariely: There's happiness with your salary, which is telling you about yourself and telling other people about you.
Daniel Ariely is a professor of behavioral economics at Duke and author of "Predictably Irrational."
Ariely: The moment the amount becomes public, all of a sudden your happiness with your salary could be motivated by different things then your happiness with the actual money that you really need.
That's because comparisons, if not envy, creep in. Ian starts thinking his paycheck should be bigger during boys' night out with his buddies -- including one who's in tech and another who's a health care executive.
Doescher: I pretty much assume they all make more than I do. I honestly think that hanging out with them more since we've moved back to Portland was one of the things that made me think: I should be making more. And I realize that we haven't yet shown ourselves naked, so we probably make...about $106,000 a year.
Seventy-one thousand dollars for Ian, $35,000 for Jennifer's part-time work as priest. To do the brutal math here, $106,000 a year is 63 percent more than the household income of Shana and Ryan across the dinner table.
Ryan McCauley: Well, I think it creates a little separation. You know, knowing that you have more means than we do and so we're not there yet. We've been trying to kick it together to buy a manufactured home and that's like our big dream right now but that seems like so far off. But on the other hand it still makes you human. You're not superhuman. You're not making millions of dollars a year.
And to be clear, the typical income in America, the median, is less than $52,000. This year, when a polling firm looked at income and well-being, it found that when you get below that $50,000 level, happiness goes down the tubes.
I'm David Brancaccio for Marketplace.
People save money by not buying needless stuff. People have trouble making money when people aren't buying needless stuff. The only solution I see is for people to have enough money that they can both save money and feel comfortable spending some money on needless stuff. People can't be paid more for making or sellilng needless stuff when nobody is buying needless stuff. So, we have to find another way for people who are already employed making and selling needless stuff to have enough money to both save money and buy needless stuff.
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Where I work I earn roughly $60,000 per year, however I sometimes think the tax system thinks all of us are rich. I got paid overtime for working four hours recently on a Sunday night and I was taxed @ $25.00 per hour on a separate check for that work. I feel the pain for those in the story.
@nelson - debt-free is definitely the strategy to pursue, because debt also costs you in interest payments (and in some cases, fees and penalties). Being debt-free, you can get the full purchasing value (or savings) from your after-tax income.
@jdb - yes, there is value in benefits and a lot of salary and/or cost of living comparisons ignore them, for just raw salary. A friend joined a startup (after a few months of unemployment) for 80% of her old salary and without benefits, in exchange for a shot at a bigger payoff down the road. She is learning that the difference is more than just the 20% wage reduction, but also the cost of what were once benefits: a) she gets group health insurance through her professional organization (much higher cost, worse coverage, than her old corporate plan); b) her dentist gives her a 20% discount and she covers the remaining 80% in cash (previously, her deductible and copays were about 20% and her old corporate plan covered about 80%); c) after breaking her eyeglass frames, she was able to find a replacement frame that fit her lenses - at a higher cost than the original frames, lenses, contacts and examination under her old corporate plan (and after begging to not submit to a new examination; the new frames were found in box of old stock so the optician was glad to be rid of them). She figures the cost of missing benefits are an additional 10% - 15% but she accepts it, for the startup is very promising and she wouldn't go back to her old job (with her old firm or another).
Well, having been in the position of making $75k and now making over $90k and I have to say I'm happier now money wise. But that might instead be due to the fact that I paid off my mortgage last year. I have more free cash flow and more sense of security... even if I do lose my job I know I'll have a place to live. Either way, as far as monetary happiness is concerned, I highly recommend paying off all of your debts including your mortgage (or having an equivalent amount of money in the bank and renting).
"The assumption about pay is that we all want more of it. Who ever asks the boss for a decrease?"
I have. I am a pharmacist and back in 1998 I was working for a long term care pharmacy where the manager was really appreciative of the extra tasks I had been performing and she had given me an excellent raise. I was young, single and coming from a lower middle class-poor blue collar family (the first grandchild in a large family to graduate from college) I was already making more money than I had ever dreamt possible. I had asked my manager to take my raise and divvy it up between a number of technicians who were an integral part of helping me achieve those tasks. At the time I believe this group was making a little above minimum wage, so maybe at most around $6.50/hr. I think the going rate for raises that year for the technicians would have been about $0.10 t0 $0.15/hr. If my raise was allowed to be shared amongst that group, it could have potentially elevated their raises to about $0.40 to $0.50/hr. Ignorant as I was of the system that is corporate America, I did not realize that it would not be possible for my employer to do that. The payroll for the pharmacists was funded separately than the payroll for the technicians, each with separate budgets, and my asking them to give my raise to a few efficient, hard working, and dedicated technicians was like asking to change the rotation of the earth. I was poor until I graduated college. But I don't think I was any less happy as a person than I am now. I think the happiness question may be tied less to money than it is to finding love (although listening to people, it may seem you are more likely to find love if you make more money).
All this supposedly candid disclosure talk is meaningless without discussing benefits. My household income may be $65000, but, since we are self-employed, out of that comes our (lousy) health insurance ($12K/yr) and all our retirement savings. Not to mention the extra 6.5% payroll tax that employers pay that most people do not include as part of their income. Also, no vacation pay. All of that adds up to about 30% that wage earners never even think about. I would have to make almost $90,000 to make the same as a wage earner who makes $60,000.
"The assumption about pay is that we all want more of it. Who ever asks the boss for a decrease?"
I did. A few years ago at my last job, I decided I wanted more time to work on personal projects and possibly go back to school, so I asked for a pay cut and went to a 4-day work week.
