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A famous study by renowned behavioural scientists Daniel Kahneman and Angus Deaton found that broadly speaking, more money doesn't make one happier once income reaches between $60,000 and $90,000. Granted, those figures don't account for inflation rates between now and when the study was conducted in 2010, but it provides a good rule of thumb. The magic number for happiness that many are familiar with is $75,000. That's because that was the number which was widely quoted in headlines from the likes of The Wall Street Journal and Time. However, that figure was used simply because it was the midpoint of the range.
Kahneman and Matthew Killingsworth have just published a new paper in PNAS where they jointly analyze the data from the 2010 study and a 2021 study by Killingsworth that contradicted the original findings. What did they learn? That happiness does level off at a certain income point — but only in the least happy 20% of the population.
For the rest of us, more money does equal more happiness. With the spotlight on the gender pay gap in March for International Women's Day, it's important to point out that denying women the compensation they are entitled to not only sets them back financially but also could impact their happiness. Given the clear career link between happiness and performance, women could fall even further behind professionally if companies do not continue to work toward closing the gender pay gap.
Three reasons why happy employees get ahead at work
Reason #1: Happy employees are more productive
An Oxford University study found that happy employees were 13% more productive, and this number is consistent with other studies on the subject. Productivity is one of the strongest measures of performance. Therefore, it's a key consideration in many promotion and pay rise decisions — so unhappy employees could be passed up for great career opportunities.
Reason #2: Happy employees experience less emotional regulation
When we're happy, we have more energy to focus on the tasks at hand because, frankly, being depressed is hard work. It also requires us to spend more energy on emotional regulation. Emotional regulation is the energy and attention we use on controlling emotional experiences — such as sadness — and leaves us less energy to focus on work.
Reason #3: Happy employees take fewer sick days
The connection between health and happiness is well-documented. This connection translates to the workplace — happy employees take ten times less sick leave. It stands to reason that if you're taking fewer sick days, you're able to contribute more consistently.
Happiness is good for business. Paying people more is one way to boost happiness levels. If businesses are not willing to give pay rises and help close the gender pay gap, then they should be prepared for the performance and diversity, equity and inclusion fallout.
