The Pay Raise People Say They Need to Be Happy
We frequently overestimate just how much happiness money buys
By JOE PINSKER
Tue, Nov 21, 2023 9:11am
3 min
3 min
People are often convinced their lives would improve if only they could climb a few rungs on the income ladder.
They are right, to an extent. Many studies have found a link between income and happiness, both in terms of day-to-day mood and longer-term life satisfaction. Having more money would help many people afford necessities, and on average, richer people report being happier.
Exactly how much more money do we think we need to be happy? A new survey from the financial-services company Empower put the question to about 2,000 people.
In the survey, most people said it would take a pretty significant pay bump to deliver contentment. The respondents, who had a median salary of $65,000 a year, said a median of $95,000 would make them happy and less stressed. The highest earners, with a median income of $250,000, gave a median response of $350,000.
Employers are planning on an average pay increase of 3.9% in 2024 for nonunion employees, according to a survey from the consulting firm Mercer. In the Empower survey, Americans said that to be happy, they would need almost a 50% raise.
Just how much happier a 3.9% or 50% raise would make any given person is hard to determine, researchers said.
One study, published in the journal Proceedings of the National Academy of Sciences last year, found that people who randomly received $10,000 tended to get a happiness boost that lasted at least six months. (The $2 million given out in the study was provided by a wealthy couple, who the researchers estimated generated 225 times more happiness than if they had kept the money themselves.)
Another, from the Review of Economic Studies in 2020, looked at lottery winners in Sweden whose prizes were mostly between $100,000 and $500,000. They reported higher levels of satisfaction with their lives more than a decade after their windfall, compared with lottery players who won no prize or a small one.
The magnitude of a raise’s effect, though, might not be life-changing.
“The impact of money on happiness isn’t as large as people typically assume,” said Elizabeth Dunn, a psychology professor at the University of British Columbia and a co-author of a book on money and happiness. “Happiness is determined by so many different factors that changing any one thing, it’s hard to have a huge impact.”
Happiness for sale
About seven in 10 respondents in the Empower survey said they strongly or somewhat agreed with the statement: “Having more money would solve most of my problems.” Similar proportions of people in each income bracket felt that way, including those with salaries of $200,000 or more.
Dunn said that many people might be happier if they focus on the best ways to use the money they have, rather than on getting more of it.
“That’s something that we know makes a difference and that people have control over in the immediate term,” she said.
Dunn said many people over emphasise money, relative to other variables, as a path to contentment. Her research indicates that those who give priority to time over money tend to be happier in life.
A little bit more
And as soon as someone does reach a new pay tier, they often start focusing on the next one as their target recalibrates.
“They might imagine that once they get the higher salary, then that’ll be enough,” said Matt Killingsworth, a senior fellow at the University of Pennsylvania’s Wharton School who studies the causes of happiness. “In reality, once they get there, they’ll probably want a little bit more.”
Even very wealthy people think like this. A 2018 study asked millionaires to rate their happiness on a scale from one to 10 and, if they didn’t say 10, predict how much money they would need to move one point higher. Slightly over half of those with a net worth of $10 million or more said their wealth would need to increase by at least 50%.
“It’s part of what makes humans amazing,” said Killingsworth of the impulse to continue advancing. “But it also means we rarely look at an aspect of our life and say, ‘That’s absolutely perfect.’”
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Report by the San Francisco Fed shows small increase in premiums for properties further away from the sites of recent fires
By CHAVA GOURARIE
Wed, Aug 28, 2024 3 min
3 min
Wildfires in California have grown more frequent and more catastrophic in recent years, and that’s beginning to reflect in home values, according to a report by the San Francisco Fed released Monday.
The effect on home values has grown over time, and does not appear to be offset by access to insurance. However, “being farther from past fires is associated with a boost in home value of about 2% for homes of average value,” the report said.
In the decade between 2010 and 2020, wildfires lashed 715,000 acres per year on average in California, 81% more than the 1990s. At the same time, the fires destroyed more than 10 times as many structures, with over 4,000 per year damaged by fire in the 2010s, compared with 355 in the 1990s, according to data from the United States Department of Agriculture cited by the report.
That was due in part to a number of particularly large and destructive fires in 2017 and 2018, such as the Camp and Tubbs fires, as well the number of homes built in areas vulnerable to wildfires, per the USDA account.
The Camp fire in 2018 was the most damaging in California by a wide margin, destroying over 18,000 structures, though it wasn’t even in the top 20 of the state’s largest fires by acreage. The Mendocino Complex fire earlier that same year was the largest ever at the time, in terms of area, but has since been eclipsed by even larger fires in 2020 and 2021.
As the threat of wildfires becomes more prevalent, the downward effect on home values has increased. The study compared how wildfires impacted home values before and after 2017, and found that in the latter period studied—from 2018 and 2021—homes farther from a recent wildfire earned a premium of roughly $15,000 to $20,000 over similar homes, about $10,000 more than prior to 2017.
The effect was especially pronounced in the mountainous areas around Los Angeles and the Sierra Nevada mountains, since they were closer to where wildfires burned, per the report.
The study also checked whether insurance was enough to offset the hit to values, but found its effect negligible. That was true for both public and private insurance options, even though private options provide broader coverage than the state’s FAIR Plan, which acts as an insurer of last resort and provides coverage for the structure only, not its contents or other types of damages covered by typical homeowners insurance.
“While having insurance can help mitigate some of the costs associated with fire episodes, our results suggest that insurance does little to improve the adverse effects on property values,” the report said.
While wildfires affect homes across the spectrum of values, many luxury homes in California tend to be located in areas particularly vulnerable to the threat of fire.
“From my experience, the high-end homes tend to be up in the hills,” said Ari Weintrub, a real estate agent with Sotheby’s in Los Angeles. “It’s up and removed from down below.”
That puts them in exposed, vegetated areas where brush or forest fires are a hazard, he said.
While the effect of wildfire risk on home values is minimal for now, it could grow over time, the report warns. “This pattern may become stronger in years to come if residential construction continues to expand into areas with higher fire risk and if trends in wildfire severity continue.”
