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Happiness costs 95 000 dollars per year

July 3, 2020

reading time: 8 minutes

by Thomas Weibel, guest author

happiness money wealth

Money makes you happy, but only up to a certain point. Researchers have looked into just what that point is.

How much money does a person need to be happy? The question is as old as money itself. The obvious answer is: a lot of money is good, even more money is better. Even the richest five percent of people, who according to a 2019 Credit Suisse study, hold more than 70 percent of the world’s wealth, will be telling themselves this, as will the one percent of the population that holds 45 percent of all global wealth. 

If money makes you happy, does more money make you even happier? Does happiness really increase proportionally to income? Or is there a point at which more money no longer leads to greater well-being? Psychologist Daniel Kahneman and economist Angus Deaton determined in 2010 that a higher income does indeed result in a higher fundamental satisfaction with life, but that after a certain ceiling has been reached (which they assumed for the US was an annual income of 75 000 US dollars), it results in a lower subjective feeling of happiness.

Happiness is more expensive for women

The American psychologists Andrew T. Jebb and Louis Tay from Purdue University in Indiana, and their colleagues Ed Diener and Shigehiro Oishi from the University of Virginia, wanted to get to the bottom of this. They analyzed a large amount of data collected between 2005 and 2016 by the American Gallup polling institute, which surveyed more than 1.7 million people in 164 countries around the world during that period.

wealth happiness money cost happy

The results of the study were surprising. People in richer countries stated that they needed more money for “subjective well-being” than respondents in poorer regions, as expected. However: in all parts of the world, respondents felt that there is an ideal income, a kind of threshold, beyond which they suspect there would be a decline in quality of life. The global average for this ideal income level is 95 000 dollars per year when talking about a person being able to fulfill all conceivable wishes, and between 60 000 and 75 000 dollars when it comes to “subjective well-being”, or feeling happy in everyday life. In Western Europe, these figures were 100 000 and 50 000 dollars, respectively. These amounts relate to a person’s individual annual salary; “when it comes to families, the figures are higher,” adds study author Jebb.

If you look at just the US, the figures are somewhat higher: the happiness threshold was an annual income of USD 105 000; the threshold for happiness in everyday life was 85 000 dollars. This presumed price of happiness stands in sharp contrast to the economic reality: the median salary in the US was 45 646 dollars at the end of 2019. Upon closer examination, however, the researchers identified some noteworthy differences: looking at the global average, happiness appears to have a somewhat lower price tag for men (USD 90 000), than for women (USD 100 000) – and is cheaper for people with a low level of education (USD 70 000) than for those with a medium level (USD 85 000) or higher level of education (USD 115 000).

Does more wealth mean less happiness?

Jebb and his colleagues summarize that for people to be happy, they require a basic sense of material security. This price of happiness varies in different parts of the world, and it depends on factors such as education, gender and social competition. But people all over the world have a notion of an income ceiling which, if exceeded, does not only not increase the individual’s sense of happiness, but actually lowers it.

Why do people feel there is a loss of happiness in the case of excessive income? Why does an abundance of prosperity reduce the quality of life? Wealth does not come automatically, but usually takes hard work. In addition, greater prosperity drives the desire for even more money. A larger family, living in a more expensive neighborhood, acquiring status symbols – all this is only possible through working longer and harder, and taking on more responsibility.

Wealth happiness money

Excess wealth, as Jebb and his co-authors summarize, usually leads to a vicious circle: higher demands take up more time and limit positive leisure experiences, promote materialistic values and fuel social competition, which in turn leads to even higher and at some point unfulfillable expectations. The negative effects of excessive prosperity, the researchers hypothesize, do not come to light only once the highest level of income is reached, but probably much earlier, namely when people direct all their efforts towards increasing their wealth.

Excessive luxury does not mean excessive happiness: this was already clear to Daniel Kahneman and Angus Deaton, two Nobel Prize winners for economics. They saw the reason for this, quite simply, as lying in the time available to people to live life: “There is an income threshold beyond which money no longer enables us to do what is most important for our sense of happiness: spending time with people we love; avoiding pain, stress or illness; enjoying leisure time and hobbies – and quite simply the little pleasures of life.”

What science has ascertained through elaborate calculations, the old adage has basically always stated: money isn’t everything but without money, everything is nothing.

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