WSJ Your Money Briefing - A Bump in Pay Brings Happiness, Regardless of Your Income Level

Episode Date: October 7, 2024

New research shows that people in different income groups often experience similar feelings of satisfaction when they receive bonuses or raises. Host J.R. Whalen is joined by WSJ reporter Joe Pinsker to explain why. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Exchanges. The Goldman Sachs podcast featuring exchanges on the forces driving the markets and the economy. Exchanges between the leading minds at Goldman Sachs. New episodes every week. Listen now. Here's your money briefing for Monday, October 7th. I'm JR Whalen for The Wall Street Journal. October 7th. I'm JR Whalen for the Wall Street Journal. Researchers who study the relationship between money and our behavior found that having more money can mean more happiness, even if you're already rich. If you look at how incomes are actually distributed in the US, that is to say, how much money a bunch of different people make.

It's actually the case that at the high end of income, income grows so much that it's large enough so that people are actually getting enough additional dollars to continue getting happier. We'll talk to Wall Street Journal personal finance reporter Joe Pinsker after the break. Whether you're practicing your morning breathwork, waiting for your favorite artists to come on stage or running errands at the perfect pace. Liquid IV powder helps you turn ordinary water into extraordinary hydration so you can live a more extraordinary life. Live more with Liquid IV Hydration Multiplier, available in refreshing lemon, lime, passion fruit and strawberry flavors. Buy a stick in store at Costco, Walmart, Amazon and other Canadian retailers.

at Costco, Walmart, Amazon, and other Canadian retailers. New research from the University of Pennsylvania's Wharton School shows having more money can buy happiness, even for those who are already well off. Wall Street Journal personal finance reporter Joe Pinsker joins me. Joe, your beat is the pursuit of happiness and how people feel about money and the economy. Why is this so important to economists and researchers? This is so important to economists and researchers because it's so important to us. The question of how much money do I need, how much money do I want, these are on a lot of people's minds. Sometimes these questions are filled with hope, other times they're filled with worry,

even in the case of people who already have a lot of money Philosophers and religious leaders might say that academic research isn't the only place we should look for Answers to that question but getting some clarity on it in the data would certainly be nice a few months ago You and I talked about how as incomes increase each additional dollar mattered less for people's happiness What's changed? One interesting thing about this new research I wrote about is that it encourages us to think in percentages rather than dollars. So if you think about the effect that a $10,000 raise might have for someone, it's going to be probably a different impact in their life

if they make $20,000 versus $200,000. But if you think in percentages rather than dollar terms, and instead of saying $10,000 raise, you just say a 10% raise, that proportional increase will probably lead to a similar size boost in happiness across income levels. But why would more money result in significant happiness in people who are well off and might have enough money already. Researchers have been able to say that the more money somebody has, the less happiness the additional

dollar brings. When people hear that though, they might take it to mean that the majority of the effects of money on happiness take place at low levels of income. So if somebody who doesn't make that much money gets more, it's going to have a bigger effect. But if you look at how incomes are actually distributed in the US, that is to say, how much money a bunch of different people make, it's actually the case that at the high end of income, income grows so much that it's large enough so that people are actually getting enough additional dollars to continue getting happier. In other words, the amount of dollars

that you have to add to your salary does keep increasing, but at the very high levels of income, salaries actually do go up that much as people get raises and receive bonuses. What does the research say about pay bumps in additional money and lower tiers of earners? Pay bumps matter a lot for people who don't have much money, and that's because it just takes a smaller amount of dollars to make a really big difference in their lives.

I've talked with lots of people who talk about the power of moving from a state of being financially insecure to being financially stable, and they say that that's a really huge change. That's not something that somebody who already makes hundreds of thousands of dollars a year can do. They've already made that one-time transition. But does more money guarantee more happiness? You probably don't need me to tell you no, but these things that we've been talking about, they're patterns in the research. There are exceptions. There's actually a lot of variation in how individual people's happiness is shaped by money. Money seems to just matter more for some people. For other stories

I've worked on covering the pursuit of happiness, I've talked with people who got raises and then felt let down by them for various reasons. I've also talked with people who got raises and then felt let down by them for various reasons. I've also talked with people who, out of their own volitions, started making less money. They took a pay cut and they say they're happier as a result. So even if there are these kind of general patterns, money and happiness is just as complicated as and varied as any individual person is. The research you looked at took a broad look at people's happiness. What else besides money can influence that in people's lives? Oh

Man lots of things more than I could even list here Obviously some big ones are your relationship your job where you live But there's this tendency for us to fixate on one thing as the thing that if we changed it We'd be happy and for a lot of people, money is that thing. In reality, I think we often overlook how happiness is this kind of complex result of a bunch of different inputs and money is just one of them.

So just adjusting the dials on money in your life may not completely change your life in terms of your happiness. That's WSJ reporter Joe Pinsker. And that's it for your money briefing. This episode was produced by Trina Menino and Zoe Kalkin in terms of your happiness.