A recent study by two economists found that a $75,000 salary is the threshold of happiness for workers. According to the study, workers reported higher levels of happiness as their incomes grew, until they reached $75,000; then the effect reached a plateau. Economists Angus Deaton and Daniel Kahneman explained that workers do continue to feel increased levels of success in conjunction with higher salaries, but their daily levels of happiness didn’t grow at the same rate.
Naturally, the study sparked debate about whether any salary has a universal effect on people. A new college graduate looking for her first journalism job might be thrilled to get a starting salary of $75,000. A surgeon with massive student loans accruing interest would probably view that same salary as unacceptable. A single person with little debt can probably do more with that money than a parent of four children. In other words, when it comes to salary, it’s all relative.
Taking that into consideration, the results of a new study on how knowing another person’s salary affects perception your happiness isn’t terribly surprising. In “Inequality at Work: The Effect of Peer Salaries on Job Satisfaction,” researchers found that knowing how much your colleagues make can affect your job satisfaction.
The researchers found that workers making less than the median income expressed only expressed dissatisfaction when they found out they were on the lower end of the scale. Those earning more than the median didn’t express a particular sense of satisfaction that they were on the higher end of wage earners. In fact, both sets of workers expressed frustration with income disparity. The workers on the lower end of the pay scale were more likely to plan on looking for a new job in the coming year and to hold more negative views of their situation.
Slate columnist Ray Fisman does an excellent job of breaking down the study. In his opening paragraph, he recounts when he negotiated a starting salary for his first job out of graduate school. He was content with his salary and new lifestyle until he found out that other equally educated colleagues were earning more than he. Suddenly, the pay wasn’t adequate.
A site like CBSalary.com is good for someone negotiating his or her salary, but surely some of us are using it to see how much our neighbors are earning. We’re nosy like that, aren’t we?
And more than anything, Fisman’s anecdote gets to the complexity of salary and the issues raised by the study. Do workers view compensation purely as a value for their work? How important is a co-worker’s salary to us? If we think we’re adequately compensated until we realize we’re making less than our cubicle neighbor, how do our views change? And should it matter? As with the idea that $75,000 makes you happy, is everything related to salary relative?