The assertion that "you do not need to make more than US$75,000 a year to be happy" is undoubtedly familiar to everyone who has read a self-help book or spent any time perusing pop psychology newsletters in the last ten years.
The Bible has long taught us that money is not the way to salvation, so the story of the salary ceiling for contentment is both charming and shocking.
"A rich man cannot enter the kingdom of God as easily as a camel can pass through a needle." Matthew 19:24
Two titans of behavioral economics, Princeton University's Daniel Kahneman and Angus Deaton, conducted a study in 2010 that is the source of the US$75,000 happiness myth.
To determine the relationship between income and happiness, they examined survey data from hundreds of thousands of Americans in the US.
Their conclusion seems deliciously straightforward: emotional well-being increased with income, but only to the extent that it reached approximately US$75,000 annually (roughly equivalent to US$113,000 in 2025 buying power, or $174,000.
People did not report higher levels of daily happiness after that.
The headline was too good to ignore. Our moral sensitivities are fully aligned with the notion that money cannot purchase happiness (beyond a moderate threshold). It was embraced by podcasts, newspapers, and writers from airport bookshops.
The translation loses the subtleties of the study. Meaning and purpose are important aspects of job that go beyond compensation. Employers favored the notion of promoting high-performing employees without raising wages by only providing a more compelling narrative about their companies.
The actual findings of the study
At $75,000, Kahneman and Deaton did not assert that life abruptly stopped becoming better. According to their statistics, there are two types of happiness.
The first was emotional well-being, which included self-reported feelings of stress, joy, anger, and melancholy from the previous day. The second was life appraisal, which is a self-reported rating of your life as a whole.
According to the study, life evaluation continued to increase with money, while emotional well-being plateaued at about $75,000. In other words, even if having more money did not make people grin more every day, it nevertheless gave them a greater sense of life pleasure.
It makes a difference. Even if you might be equally as happy making $80,000 as $180,000, you are more likely to claim to lead a pleasant life when your income is higher. This could be due to your ability to pay for better or more secure housing, pursue higher education, or just keep up your capacity for future planning.
The study was reexamined.
In 2021, psychologist Matthew Killingsworth tracked people's emotions in real time using surveys that were accessible on smartphones. According to his data, life evaluation and emotional well-being both kept rising well above $75,000.
It seems that there might not be a "happy plateau."
Despite Kahneman's initial disagreement, the two scholars engaged in an uncommon academic practice: a "adversarial partnership."
Higher wealth does, in fact, correlate with better well-being for the majority of people, according to a joint report they published in 2023.
Even for salaries beyond $100,000, that was the case. More money does not address the underlying causes of misery, though, and the effect does plateau for a smaller group of persons with low emotional well-being.
In summary, as you were undoubtedly aware from reading famous biographies and interviews, money aids but is not a panacea.
Why this is important
The notion of the US$75,000 endures because it is reassuring. It gives us comfort in knowing that we can achieve pleasure even if we do not have a lot of money and that those who are wealthy are not always happier than the rest of us.
The bigger picture is more human and more fascinating. Money can buy you freedom from suffering, from worrying about expenses, or from unforeseen setbacks. Is a problem truly a problem if it can be resolved with money?
Kahneman reminded us of the importance of this research prior to his death last year. He was not attempting to spread a message that was anti-money. He was attempting to quantify the complex relationship between economics and psychology.
Kahneman wanted to measure what made life worthwhile, even if he did it clumsily. The results were eventually skewed and dumbed down by pop psychology books and self-help bloggers.
What we can learn from Australian statistics
Let us now examine the statistics in the context of Australia. As of August 2021, the US$75,000 from 2009 is equivalent to $146,000. Why travel back in time? since we conducted our most recent census at that time.
For the first time, questions about chronic health issues were included in the most recent Census. Therefore, by examining medically diagnosed mental health issues by individual income range, we can make inferences about happiness or life satisfaction.
The outcome is obvious. The number of bad mental health diagnoses decreases even at the $146,000 level. Young individuals who work part-time while they are in school or those who choose to work a bit on the side even though they do not need a job are primarily to blame for the extremely low annual salaries of less than $15,600.
In a time of geopolitical unpredictability and rising living expenses, money allows you to move around if necessary, buy better education for your children, and make expensive groceries and electricity a minor annoyance rather than a life-threatening crisis. Generally speaking, having money makes life less stressful.
Affordable housing and reduced energy costs should therefore be viewed by our national government as instruments for promoting national well-being rather than merely as economic concerns.
Reducing rent or electricity expenses by one dollar has the same impact as increasing salaries for people who are most in need. Stress decreases, resilience increases, and happiness becomes less reliant on luck or inheritance when necessities are reasonably priced.
0 Comments