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Tess Vigeland: Perhaps you don’t care too much for money, because money can’t buy you love. But apparently, it can buy you some measure of happiness. In the middle of this Great Recession, some Princeton economists got together and tried to come up with a number, an annual income at which people would consider themselves “happy.” They found out that the more money you earn — up to $75,000 — the happier you are. Beyond that, apparently, it’s all gravy.
We asked Marketplace’s Alisa Roth to poke around and see how the study stacks up with reality.
Alisa Roth: I’m on Fifth Avenue. It’s one of those stretches of New York that can make you feel poor, even if you’re not: Saks Fifth Avenue is right behind me. Tiffany’s is a few blocks north. Prada’s here. Armani. You get the idea.
It’s hard to argue that life would be better if you could afford an expensive pocketbook or a designer evening dress. But this new study — which appears in the Proceedings of the National Academy of Sciences — says earning more money does make you feel better about your life. To some degree.
Daniel Kahneman is one of the authors.
Daniel Kahneman: I would describe that not so much as money buying happiness, but as lack of money buying misery. Below $75,000, people get increasingly unhappy.
To come to that conclusion, Kahneman — who’s an emeritus psychology professor at Princeton, and his colleague, Angus Deaton, who’s an economist there — looked at hundreds of thousands of responses to surveys on well-being.
What they found is people’s happiness increases with their income. But they found that increase levels off after the $75,000 mark. People who earn more than that, say they feel better about their lives generally. But how happy they are on any given day doesn’t really change that much.
One of the people I talked to is a man named Dennis Cruise. He says his experience has been similar.
Dennis Cruise: What I feel money does for you is allow you to pay your bills so that you don’t have to worry that you’re not going to have a roof over your head, that you’re not going to have food in your kitchen.
He’s a computer programmer. He says before the financial crisis, he was earning six figures. He just started a new job this week, which pays considerably less. He’s grateful to have work — he was unemployed for a long stretch — but he’s also afraid he’s not making enough to pay his bills.
Now, the study suggests Cruise would be happier if he earned more, but only if it were enough for him to stop worrying about money. If he started earning a lot more, he might not be a lot happier, though he’d probably feel better about his life. Which is no small thing, but it’s also not the same as how you feel right now.
I asked Kahneman, one of the authors, what we should conclude from this.
Kahneman: You clearly need a minimal income. But in addition, you need many other things. Mostly I think you need to spend time with people you like or love.
That’s pretty much what another person I met, Michael Feliz, told me. I met him on Fifth Avenue, coming out of Saks with his wife. He said he’d retired recently, so he’s earning about a third of what he used to.
Michael Feliz: But my wife and I are very happy. We love each other. We have children, we love our children. And I think that’s the whole thing. Happiness in life depends on your inner happiness and your happiness with your family.
When we finished talking, he and his wife continued walking down Fifth Avenue, holding hands.
In New York, I’m Alisa Roth for Marketplace Money.
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