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March 13, 2018

Money buys happiness—but only up to this threshold, study finds

Daily Briefing

    Money can buy happiness—but there comes a point where the costs associated with that extra income might stop paying off, according to a recent study in Nature Human Behaviour.

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    Study details

    For the study, researchers from Purdue University and the University of Virginia looked at the correlation between income level, emotional well-being, and how satisfied people were with their lives—a measure the researchers termed "life evaluation." According to TIME, the life evaluation measure included factors such as long-term goals and how people think they compare with peers.

    The study relies on Gallup data from 1.7 million people in 164 countries. People were asked to rate their lives on a scale from zero ("worst possible") to 10 ("best possible"). The researchers used that information, along with reported income, to identify the ideal earnings—or "satiation point"—in different regions throughout the world.

    Key findings

    Worldwide, an income of $95,000 is ideal for an individual's life evaluation, while an income range between $60,000 to $75,000 is the ideal for emotional well-being, according to study author Andrew Jebb, a doctoral student at Purdue. The $60,000 figure was the satiation point for positive emotions, such as happiness or enjoyment, while $75,000 was the satiation point for negative emotions, such as sadness or stress.

    According to the researchers, the satiation points varied throughout the world and with education level, with people in wealthier nations and those who had more education generally having higher income satiation points. For instance, in North America, the individual income satiation point for life evaluation, at $105,000, is higher than the global point, as is the income range for emotional well-being, ranging from $65,000 to $95,000. Based on the researchers' suggested calculations, the ideal income in terms of life evaluation for an American family of four would be $210,000, CNBC reports.

    Further, the researchers observed that life satisfaction declined when people surpassed the life evaluation satiation point for their region, according to CNBC. The researchers suggested the reduction could be tied to costs associated with higher income, such as greater workloads, more time commitments, and more significant responsibility. Another factor at play, according to the researchers, may be that people become more focused on material gains and comparison to others once their basic needs are met.  

    The researchers did not find significant differences between men and women (Blummberg, CNBC, 2/28; Ducharme, Time, 2/14; Hafner/Evans, Indianapolis Star/USA Today, 2/26; Preidt, HealthDay, 2/14; Ray, Gallup, "Gallup Blog," 2/27).

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