While most people believe that having more income would make them
happier, Princeton University researchers have found that the link is
greatly exaggerated and mostly an illusion.
People surveyed about their own happiness and that of others with
varying incomes tended to overstate the impact of income on well-being,
according to a new study. Although income is widely assumed to be a
good measure of well-being, the researchers found that its role is less
significant than predicted and that people with higher incomes do not
necessarily spend more time in more enjoyable ways.
Two Princeton professors, economist Alan B. Krueger
and psychologist and Nobel laureate Daniel Kahneman, collaborated with
colleagues from three other universities on the study, being published
in the June 30 issue of Science. The new findings build on their
efforts to develop alternative methods of gauging the well-being of
individuals and of society. The new measures are based on people's
ratings of their actual experiences, instead of a judgment of their
lives as a whole.
"The belief that high income is associated with good mood is widespread
but mostly illusory," the researchers wrote. "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 Princeton researchers collaborated with psychologists David Schkade
of the University of California-San Diego, Norbert Schwarz of the
University of Michigan and Arthur Stone of the State University of New
York-Stony Brook.
The researchers have developed a tool to measure people's quality of
daily life known as the Day Reconstruction Method (DRM), which creates
an "enjoyment scale" by requiring people to record the previous day's
activities in a short diary form and describe their feelings about the
experiences. Their 2004 study using this method, which surveyed 909
employed women in Texas, provided evidence that higher income played a
relatively small role in people's daily happiness.
For the new study, the researchers examined data from the 2004 survey
to illustrate misperceptions that more money buys more happiness. Their
experiment extended previous studies in which people have exhibited a
"focusing illusion" when asked about certain factors contributing to
their happiness -- attributing a greater importance to that factor once
it has been brought to mind. For example, when people were asked to
describe their general happiness and then asked how many dates they had
in the past month, their answers showed little correlation. But when
the order of the questions was reversed for another group, the link
between their love lives and general happiness became much greater.
To test whether this illusion applied to income, Krueger, Kahneman and
their colleagues studied the responses given by the women in the 2004
DRM survey. After they were asked to report the percentage of time they
spent in a bad mood the previous day, they were asked to predict how
much time people with certain income levels spend in a bad mood.
Survey respondents expected women who earned less than $20,000 a year
to spend 32 percent more of their time in a bad mood than they expected
people who earned more than $100,000 a year to spend in a bad mood. In
actuality, respondents who earned less than $20,000 a year reported
spending only 12 percent more of their time in a bad mood than those
who earned more than $100,000. So the effect of income on mood was
vastly exaggerated.
To provide further evidence on the role that income plays in people's
lives, the researchers conducted an additional DRM survey of 810 women
in Ohio in May 2005. In this survey, respondents reported their
experiences from moment to moment as well as their annual household
income and overall life satisfaction. The new survey found that income
was more weakly correlated with individuals' happiness from moment to
moment than it was with their overall life satisfaction.
"If people have high income, they think they should be satisfied and
reflect that in their answers," Krueger said. "Income, however, matters
very little for moment-to-moment experience."
Finally, the researchers examined data from a nationwide Bureau of
Labor Statistics survey on how people with varying household income
levels spend their time. These data show that people with higher
incomes devote relatively more of their time to work, shopping,
childcare and other "obligatory" activities. Women surveyed by the
researchers in Ohio associated those activities with "higher tension
and stress." People with higher incomes spend less time on "passive
leisure" activities such as socializing or watching television, which
the respondents viewed as more enjoyable.
According to the government statistics, men making more than $100,000
per year spend 19.9 percent of their time on passive leisure, compared
to 34.7 percent for men making less than $20,000. Women making more
than $100,000 spend 19.6 percent of their time on passive leisure,
compared with 33.5 percent of those making less than $20,000.
"Despite the weak relationship between income and global life
satisfaction or experienced happiness, many people are highly motivated
to increase their income," the study said. "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)."
The researchers noted that the two DRM surveys focused on women because
the method was in developmental stages and they wanted to study a
homogeneous group. They are in the process of collecting data on men as
well as women for a national sample to use in further studies.
The recent study was supported by Princeton's Woodrow Wilson School of
Public and International Affairs as well as the William and Flora
Hewlett Foundation and the National Institute on Aging.
