Can money buy happiness? An age-old question with as yet no definitive answer. The ancient philosophers could not find it, nor can modern economists with their spreadsheets and algorithms. A study in the International Journal of Happiness and Development has explored the complex relationship between income and happiness and provides some new insights into the debate.
Ling Zhang China Agricultural University in Beijing, China, and Sajal Lahiri of Southern Illinois University Carbondale in Carbondale, Illinois, USA, used data from the Panel Study of Income Dynamics, a comprehensive dataset that tracks individuals over time, and found that having a higher income does seem to correlate with increased life satisfaction. Importantly, the data is longitudinal, which means it tracks the same individuals over several years, allowing the researchers to control for unchanging factors such as personality traits or family background.
The study also found that for those with rising income, their happiness tends to rise too. Conventionally, the Easterlin Paradox has suggested that although wealthier people are generally happier at any given time, happiness does not necessarily increase as individuals become wealthier over their lifetime. This new research somewhat overturns that notion.
Of course, there are always exceptions to any rule, poorer people with seemingly plenty to smile about, who accept their lot and enjoy life regardless and conversely the super-rich individual who never smiles and seems perpetually burdened by their wealth.
The study used subjective well-being (SWB) scales, where individuals rate their life satisfaction on a scale from 1 to 10 to measure happiness. The results were telling: income was positively linked to life satisfaction, and the effect of income on happiness has become more pronounced in recent years. The study also showed that individuals whose income decreased in real terms, often because of factors such as technological progress or globalization, reported lower levels of life satisfaction. This suggests that declines in income, particularly among lower-income individuals, can negatively affect well-being.
While the relationship between money and happiness remains a nuanced topic, the evidence from this study adds weight to the argument that economic well-being plays a significant role in determining overall life satisfaction. These findings emphasise the importance of addressing income inequality and supporting policies that help individuals increase their earnings. As the study suggests, fostering economic fairness and opportunity may not only help individuals thrive, but could also enhance collective happiness.
Zhang, L. and Lahiri, S. (2025) ‘Income and happiness: a study of a panel of US residents’, Int. J. Happiness and Development, Vol. 9, No. 1, pp.1–14.