Wealth and happiness: hitting the sweet spot

A new report sets out to calculate the cost of subjective wellbeing across the world, writes Justin Thomas

Ohood Al Roumi, UAE Minister of State for Happiness and Wellbeing, holds up a newspaper dated November 11, 1971 with UAE Founding Father Sheikh Zayed's words as the headline: “My wealth is the happineShow more

Rising living costs in the UAE were already a harsh reality before the introduction of VAT and now many items are at least 5 per cent dearer than they were this time last year. What impact does this have on wellbeing?

Income, cost-of-living and emotional wellbeing are intertwined in a complex relationship, and the answer to such questions is never simple.

We all pay lip service to phrases such as "money can’t buy happiness", but in the same breath we readily acknowledge that debt, relative poverty and financial struggles can take their toll on our subjective wellbeing and happiness. So how much money do we need to earn each year to keep us happy? What is the price of happiness?

The answer to this knotty question lies in the concept of “income satiation”, the idea that there is a magic number, a point at which increases in income no longer lead to improvements in subjective wellbeing. It suggests that income and emotional wellbeing are related up to a certain point. Once you pass this point, increased income stops being associated with uplifts in wellbeing. But what is the magic number, the sweet spot, where income has purchased all the happiness that it can buy?

A study published earlier this year in the journal Nature Human Behavior set out to explore this question. The research team from the department of psychological sciences at Purdue University looked at data from the Gallup World Poll, comprising a representative sample of over 1.7 million people worldwide.

The team found that, globally, income satiation – the sweet spot – occurs at around $60,000-$75,000 per annum. In other words, if you are earning $75,000, then a 25 per cent pay rise is not going to increase your emotional wellbeing very much. You might be overjoyed to receive it, but this joy would be fairly shortlived – not the more enduring uplift that is characteristic of emotional wellbeing.

This global income satiation point, however, does not work for the UAE. The study found that income satiation, much like cost-of-living, varies greatly around the world. In general, satiation occurred later in wealthier countries.

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While the study doesn’t provide data for individual countries, the figures for the Middle East and North Africa suggest that this region has a higher satiation point than the global average. For the MENA region, an annual income of $110,000-$125,000 represented the point at which more money no longer brought more happiness.

If you are living in the UAE on an annual income of Dh460,000 and you get a massive pay rise, it might be nice, you may even celebrate, but it is not likely to improve your long term subjective well-being. It is also worth considering that particularly huge increases in annual income can be associated with a reduction in wellbeing too – more money, more problems.

One study, published in the International Journal of Psychiatry in Clinical Practice, describes several cases of big lottery winners who become severely depressed after their wins. The problems typically revolve around giving up their old jobs and moving into new accommodation in upmarket neighbourhoods. Lifestyle changes can disconnect people from colleagues and old friends.

The big winners also experience rifts in the family, with relatives bombarding them with ideas for “investment opportunities”, and requests for charitable donations.

Another issue for people who experience large increases in income, whether by chance or through skill and industry, is problems with parenting. The idea is that these individuals, first-generation millionaires from humble economic circumstances suddenly inhabit a strange new land of wealth and privilege. The children of these “immigrants to wealth” are born into affluence, and grow up with the values of this strange new land.

This situation can be an ongoing source of conflict, tension and sorrow within such families.

There is a relationship between income and wellbeing up to a point, but good human relationships are a much better predictor of wellbeing than income.

Dr Justin Thomas is professor of psychology at Zayed University and author of Psychological Well-Being in the Gulf States

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