Think a raise will make you happy? Think again!

Rich. But happy?

Most people think that having a higher income would make them happier. They’re wrong!

That is the conclusion of a study by Two Princeton professors, economist Alan B. Krueger and psychologist and Nobel laureate Daniel Kahneman, who say that:

The belief that high income is associated with good mood is widespread but mostly illusory. People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities.

The problem is that people still act on their mistaken belief that making more money means being happier. In short they choose income over happiness:

Despite the weak relationship between income and global life satisfaction or experienced happiness, many people are highly motivated to increase their income. In some cases, this focusing illusion may lead to a misallocation of time, from accepting lengthy commutes (which are among the worst moments of the day) to sacrificing time spent socializing (which are among the best moments of the day).

Which is just a fancy way of saying that you may think that switching jobs to get a 25% raise in return for a 2-hour commute or a 70-hour work week or ten days a month on business travel is a good deal. You’re wrong. You’d be happier with a lower salary and more time with your friends and family.

So if you’re trying to make yourself happy at work by chasing that raise, bonus or incentive, your strategy is doomed to fail. The same goes for managers trying to increase their employees’ happiness, motivation and productivity through the same means. It won’t work! It takes something else to make people happy at work. I wrote about more about it in these two chapters of the Happy At Work Book:

Read more about the study here.

3 thoughts on “Think a raise will make you happy? Think again!”

  1. Sounds like the results would be a bit different if they controlled for work time. People who work even more hours, with a longer commute, for higher pay are (obviously) going to be less happy, not more. But for people like me (living examples of the backward-bending labor supply curve), who would immediately translate higher pay into shorter work hours, the results would probably be different. I know that every time I’ve been able to cut back my work-week, I’ve been absolutely ecstatic.

  2. That’s a great point Kevin. However, only a few people use a higher salary as a means to reduce their working hours. In many cases a higher salary comes with more work built in.

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