In the United States, does reaching an income of $75,000 mean reaching the peak of happiness? Previous studies have suggested so, but new research indicates that income alone may not bring the greatest level of happiness.
In April 2010, a study published in the Proceedings of the National Academy of Sciences (PNAS) by two Nobel laureates in economics revealed that there is a monetary threshold of $75,000 for achieving happiness. When household annual income is below $75,000, people’s sense of happiness tends to decrease. However, if the income surpasses this figure, the overall level of happiness remains relatively stable.
This phenomenon is known as the “happiness plateau,” where individuals’ sense of happiness or life satisfaction does not significantly increase once their income or material wealth reaches a certain level.
Subsequent studies, however, suggest that reality may not be as straightforward. According to a report in The Wall Street Journal, as income levels rise, tax rates also increase, resulting in a diminishing proportion of actual wages in pre-tax income, and hence a decline in actual happiness.
This can be understood as the diminishing returns of increased income on happiness due to the accompanying losses. However, researchers have not yet pinpointed the exact formula behind this phenomenon, if one exists.
Matt Killingsworth, a senior researcher at the Wharton School of the University of Pennsylvania, stated that simplifying the pursuit of happiness to a pursuit of money is fundamentally wrong. At the same time, completely disregarding money as a meaningful factor is also mistaken.
Numerous studies focusing on Americans have found that, overall, individuals with higher incomes tend to be happier.
The $75,000 figure for maximum happiness derived from the 2010 study was based on responses from over 450,000 Americans surveyed by Gallup. However, in 2021, Killingsworth used more data than the original paper to measure levels of happiness and found that, in terms of 2010 dollars, people’s daily moods continue to improve when their income exceeds $75,000.
Subsequently, he collaborated with one of the co-authors of the 2010 paper, Nobel laureate in economics and Princeton University professor Daniel Kahneman, to conduct further research. Ultimately, they concurred that Killingsworth’s findings in 2021 were correct.
Killingsworth’s main explanation for this was that what matters is not what money can buy but the choices that money can provide.
However, as income increases, the impact of each dollar on happiness diminishes. According to Killingsworth and others’ research, if your salary doubles from $50,000 to $100,000, it typically would need to double again to $200,000 to achieve an equivalent increase in happiness.
In a paper published by Killingsworth and Kahneman in 2023, it was found that for certain groups, happiness levels do not increase once income surpasses $100,000, while for other groups, happiness continues to rise.
Lumisji, a psychology professor at the University of California, Riverside, told CNBC that this research made her realize that human desires are endless. “Even when we think we’ve reached a specific number, we are actually never truly satisfied.”
Nevertheless, the idea of achieving maximum happiness through salary remains attractive.
According to the official website of the University of Pennsylvania today, Killingsworth stated that these findings have practical significance. Firstly, they can provide information for policymakers on how to set tax rates or determine employee compensation.
However, he added that money is not everything when it comes to emotional happiness. “Money is just one of the many factors that determine happiness. It is not the secret to happiness, but it may be helpful.”