How Much Money Will Make You Happy?
It all depends on your reference points — how much you used to earn and how spiteful you are.
In The Science of Well-Being course from Yale University, I was surprised by spiteful acts — just that they exist — and to learn that 56% of people would spite themselves just so they could lord it over their colleagues.
What we want in the future is based on what we currently earn. And another example of how we do not think in real-life terms but in relative to what we currently earn terms. So if you are currently earning £30,000 you would think that you need to earn £50,000 to be happy.
Real-life salary increments are far less likely to jump by $20,000! In fact, the more you earn the less realistic you are! Someone who earns £100,000 would consider a £250,000 salary to be the amount to make them happy.
Van Praat and Frijters 1999 [1] found overall that for the people who thought they weren’t earning enough, every additional $1 they got, they wanted $1.40 more. We constantly think we need to earn more. This is one reference point which we use.
Another measuring stick we use is when we look at where others are compared to ourselves. We like to know our position in the pecking order, i.e. who’s better or worse off than we are and what we can do to improve our situation regardless of the cost to others. We constantly compare ourselves to others. And when we don’t get what we want we try to make sure others come down to our level!
Social comparison is evaluating yourself relative to other people where salary, attractiveness, possessions etc. are concerned. Socially comparing ourselves to others is our number one favourite pastime. It matters little if we like our salary or job.
Clark and Oswald did a study of 5000 British workers. [2] What they found was that job satisfaction went down as a colleague’s comparative salary went up.
I’d been promoted recently to a higher management grade and a colleague told me she was worried that she was being left behind. Of course, being friendly and politically naive, I encouraged her to apply for the next grade up, she was good at her job and I saw no reason why she and I shouldn’t be the same grade.
A month or so later we were out at an employee workshop. One evening, the wine was flowing and the same colleague revealed she’d been promoted and had had a nice bump to her salary. After congratulating her, I know I shouldn’t have but I asked her what she was on and it was two thousand more than I was on.
She was good but not that good and looking back I now know I’d lost the upper hand, where salary was concerned, in the process of wanting her to do well! The green-eyed monster popped up like an evil genie. That’s when I learnt to be careful who you encourage and never trust the senior management to be fair. All the while this colleague was doing well, I was resenting her and enjoying my job less and less.
I hadn’t actually lost any money so why was I unreasonable about her good fortune?
Apparently, I am not alone in this way of thinking and there are some pretty good reasons for my envy. David Burkus challenges our cultural assumptions of keeping how much we earn a secret. I believe he makes jolly good points for sharing the information to the benefit of employees, businesses and culture.
How much do you get paid? How does it compare to the people you work with? You should know, and so should they. ~David Burkus.
Humans can be a spiteful bunch.
There’s a brilliant fable about a subject known as Czech envy. Two neighbours each have a goat tethered to a post in their respective gardens. They each use their goat for milk and to make cheese. One of the goats dies. The owner of the dead goat, in the middle of the night, goes to his neighbour’s garden and kills the remaining goat.
In the modern world, Solnick and Hemenway surveyed Harvard students. [3] They asked the students to choose one of two jobs. The first job paid $50,000 but everyone else earned $25,000. The second job paid $100,000 but everyone else was on $250,000.
Having read to this point and knowing how some people respond to money, which do you think over 50% of those surveyed chose?
You got it. Rather than have a $100,000 salary the students chose the $50,000 salary so they would earn double what their colleagues earned. I call that cutting your nose off to spite your face. What do you call it?
The other revelation from choosing to earn twice as much as your colleagues is that we really don’t like being in that position of appearing less than others because of what we are worth salary-wise. I can see why many companies prefer employees to not share how much their salaries are with each other.
When you think of the unemployed you may not agree with what Clark found out when he studied two different areas. [4] He determined that an unemployed person living in an area full of employed people is going to be impacted in a bad way. However, if you are unemployed in a place where there are lots of unemployed, you’ll be fine, even if the job situation is dire. In the latter example, everyone around you is in the same situation. So your comparison is a reasonable one.
What happens when you compare your earnings to others?
We might not always compare like for like. All my colleagues in the call centre and I earn exactly the same hourly rate.
But some people might compare themselves to one of their idols, Kylie Jenner for example. But that’s just lunacy unless you’re planning on becoming a TV and business mogul, right?
O’Guinn and Schrum wanted to find out what happened to our mental states if we were binge-watching Keeping Up with the Kardashians and comparing ourselves to Kylie Jenner. [5]
The results showed that the more TV we watched the more we compared our salaries and those of our favourite celebrities the higher our estimates of others’ average salaries rose in relation to those around us. Worse is our view of our own salary going down relative to others.
The impact of watching how the Kardashians and Kylie Jenner live results in you thinking your salary is poor in comparison. You might feel unhappy about this or spend more money in trying to keep up with the Kardashians.
Schor calculated that for every extra hour of TV you watch you spend $4 more every week. [6] Something in our programming makes us want to be as good as the people we see around us on Facebook, on TV. It doesn’t matter whether the reference point is unrealistic. We don’t consider how our points of reference got their wealth.
Continuing the keeping up with your reference point thread; Kuhn and colleagues looked at a lottery winner in the Netherlands and the impact they had on their neighbours when they won a lot of money and a car. A top-end luxury car. [7] What do you think the neighbours did?
First, the groups were the neighbours who lived next door to the lottery winner, people who lived a couple of doors away and the control group which lived in the area but who weren’t seeing the shiny new car every day.
Second, how did people behave before the lottery win? They didn’t buy their cars differently just at a particular rate.
A year later, the next-door neighbours were twice as likely as the control group (they didn’t buy a new car) to buy a new car. Seeing the lovely new machine next door every day must have been too great a temptation regardless of whether they actually needed a new car or not. Proving that being bombarded by desirable items on a daily basis doesn’t make us think in terms of what is universally valid (absolutes) but what we can actually see every day.
In stealth fashion, the more we see it the more we want it. We are not aware enough to see the impact on our lives of buying what we don’t need solely because other people have it.
Conclusion
Social comparison is unhealthy either up or down. [8] On a five-point self-esteem scale, people who looked at a fake Facebook feed and compared themselves to people like Kylie Jenner scored 3.51. But when they looked downwards at people worse off than them, their score increased to 3.83.
We lose a lot of happiness when we compare ourselves upwards to unrealistic reference points. We don’t get a big boost to our egos when we compare ourselves downward, but we are imagining ourselves as big-time losers when we compare ourselves to self-made billionaires.
The worst thing is that this behaviour is of no benefit to us. Next time you catch yourself comparing what you’ve got to winners and losers stop. Just stop.
Walk away from the image. Resist the urge to join in the neverending keeping up with the Joneses. Stop with the envy and spite.
Calculate how much money you need to cover your bills and consider everything else a bonus! That always makes me happy.
Focus on something real that you want and can get by hard work and do that instead.
[1] van Praag and Frijters (1999). “The measurement of welfare and well-being: the Leyden approach.” In Well-Being: The foundation of hedonic psychology. New York: Russel Sage Foundation. Pages 413–433.
[2] Clark and Oswald (1996). Satisfaction and comparison income. Journal of Public Economics, 61(3) 359–381.
[3] Solnick and Hemenway (1997). Is more always better?: A survey on positional concerns. Journal of Economic Behavior and Organization, 37, 373–383.
[4] Clark (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of Labor Economics, 21(2), 323–351.
[5] O’Guinn and Shrum (1997). The role of television in the construction of consumer reality. Journal of Consumer Research, 23(4), 278–294.
[6] Schor (1999). The Overspent American: Why We Want What We Don’t Need. New York: NY: Harper Perennial.
[7] Kuhn et al. (2011). The effects of lottery prizes on winners and their neighbors: Evidence from the Dutch Postcode Lottery. American Economic Review, 101(5), 2226–2247.
[8] Vogel et al. (2014). Social comparison, social media, and self-esteem. Psychology of Popular Media Culture, 3(4), 206–222.
You might like to read some of my other articles on well-being.
Thank you for reading.
