Can money buy happiness? This is a million-dollar question that appears quite easy to answer. Income is known to be associated with happiness but debates on the exact nature of this relationship persist. Does our happiness rise indefinitely with higher income or is there a point where higher income does not increase life satisfaction?
An earlier study by Princeton researchers, Kahneman and Deaton (2010) on income and well-being found that high income can buy life satisfaction but not happiness; and that low income is associated both with low life evaluation and low emotional well-being.
They found a perfect happiness salary which was estimated to be about USD$ 75,000 a year, and levels off beyond that figure. This means high income improves the evaluation of life. A more recent and similar study by Jebb et al. (2018) found that satiation occurs at a higher income level, that is USD$95,000 for life evaluation and $60,000 to $75,000 for emotional well-being. This indicates a degree of happiness adaptation, and that money does have an influence on happiness through the fulfillment of both needs and increasing material possession.
However, recent research by Killingsworth (2021) from Penn’s Wharton School found that money does matter to happiness, but more than previously thought. This finding is contrary to previous research by Kahneman and Deaton (2010) and Jebb et al. (2018). His study found that higher incomes have the potential to improve people’s day-to-day well-being, rather than having already reached a plateau for many people in wealthy countries.
Yet, another new study by Catapano et al. (2022) suggests that having greater financial resources weakens the link between meaning and happiness. Interestingly, this link may be moderated by societal values in East and South Asia in a study by Lim et al., 2019.
They found that the effect of income on happiness is the lowest in Thailand and the Philippines; and the highest in South Korea and Taiwan. It appears that in East and South Asia, societal values may help to explain the East-Asian happiness gap and might refute the relevance of the Easterlin paradox.