Can Money Buy Happiness? A Deeper Dive

“Money is the root of all evil.” “Money can’t buy happiness.” “Mo’ Money, Mo’ Problems.”

Whether it be from the Bible, a parent, or the Notorious B.I.G, we have all heard the same old narrative: money isn’t the answer to our problems. Despite these warnings, we often spend our days laboring away in hopes of bagging that promotion or securing a raise. We fantasize about being rich, hunt for high-paying jobs, and constantly try to move up the financial ladder, often assuming these things will truly make us happy.

On some level, we know that money is the solution to some of our unhappiness. For example, it is clear that to somebody in poverty, more money would indeed alleviate many of their worries. Poverty is stressful, unstable, and unhealthy, and in this sense, an infusion of cash would loosen these restraints on well-being.

This contradiction seems to leave us with a paradox: if money is the solution to many material issues, but not the key to our self-actualization, what role does making money play in our growth and development as people? Is it really true that money doesn’t buy happiness, and if so, to what degree?

The $75,000 myth

If you have ever looked into this idea of money and happiness before, it is likely a certain figure has firmly lodged itself in your memory: $75,000 per year. According to the received wisdom, there is a correlation between income and happiness up until an individual is making around $75,000 (USD) a year, after which point the relationship plateaus. This figure is often treated like the holy grail in this debate, echoed by popular media coverage as a definitive cutoff point after which money no longer buys happiness.

In a way, this figure makes intuitive sense. An income of $75,000 is well above average, and for most people, this level of wealth (or its equivalent in other currencies) seems like it should be enough to guarantee a sufficient level of comfort and protection from the threat of poverty. Additionally, this figure also props up the pervasive narrative that the wealthy aren’t necessarily happier because of their riches. While it is a clean, concise, and satisfying number, unfortunately, it isn’t accurate.

The myth of the $75,000 figure began about 10 years ago, emerging from a landmark Princeton study by Nobel Prize–winning economists Daniel Kahneman and Angus Deaton.1 Widely misquoted, the study actually assessed how income led to a more positive long-term outlook on life, rather than increases in day-to-day happiness. At the time this study was conducted, $75,000 was found to be enough money to keep day-to-day financial concerns at bay; in essence, individuals in this income bracket had reached “middle-class status.” However, for most people, this level of wealth still wasn’t quite enough to achieve some long-term goals, like buying a house.

In short, instead of painting $75,000 as the ticket to feeling fantastic every day, the authors argued that the financial security conferred by this amount of wealth improves how we feel about life overall. However, even at this level of income, there was room for improvement in people’s well-being: the more money they had, the more optimistic they were about their long-term prospects. While slightly more complicated, this is the upshot of the original Kahneman and Deaton paper, rather than the oversimplified “happiness tops out at $75,000” which we’ve all read in the media.

What went wrong?

The reason that day-to-day happiness doesn’t really change as we get richer is due to a psychological concept called the hedonic treadmill. This concept holds that regardless of what’s happened to you—whether you’ve recently been hit by a car or you won the lottery—your happiness will revert back to its previous baseline within about six months, once you have grown accustomed to your “new normal.” In essence, we have a baseline state of happiness, regardless of circumstance.

But there are more issues with the $75,000-per-year story than this psychological baseline. There is always a danger in taking scientific results from a decade ago and treating them as fact. In this case, the $75,000 figure proposed by Kahneman has been subject to inflation: in today’s money, this benchmark would be closer to $93,000.2 With costs of living and education skyrocketing, while wages continue to stagnate, this number is drifting further and further out of reach for most of the population.3 If you read articles claiming that $75,000 is the ticket to joy, keep in mind that the ticket price has gone up.

A salary of $75,000 or $93,000 also means different things to different people. For a graduated college student in the Midwest with minimal loans and responsibilities, $75,000 would be quite comfortable. However, for a single mother in San Francisco, $93,000 per year could be impoverishing. Sadly, this study doesn’t control for this variation, assuming instead that income is “one size fits all.” Clearly, placing a dollar sign on happiness is nothing but a broad overgeneralization.

Mo’ money, less problems?

So, how much money is needed to maximize happiness? Unfortunately, the answer is more. This year, Wharton researchers attempted to reassess the claims made by Kahneman and Deaton about wealth and happiness, taking into account the flaws in their original study and how our economic environment has changed. Their analysis shows that, all other things being equal, earning more money makes us happier.4

Counter to every cliché or clickbait title, their analysis claimed that we are driven and satisfied by income growth, rather than any given benchmark of wealth. As long as we are making more money over a period of time, we are motivated. From a behavioral lens, this makes sense: consistent feelings of progress and repeated rewards fuel our growth-obsessed brains.5

While making more money seems to make us happier, it isn’t the same for everybody. As you move up the income ladder, happiness begins to become more pricey. For example, imagine that your income increased by $25,000. For somebody earning $25,000 annually, this is life-changing. For a person pulling in millions, this is barely a drop in the bucket. In order for a wealthier person to feel a comparable increase in well-being, they need to see significantly higher boosts to their income.5

In their analysis, they also found that instead of being a helpful aspiration, the public perception of $75,000 as the key to happiness may actually be detrimental. After the goal of $75,000 was achieved, people experienced a significant dip in happiness, which was remedied once more money was earned. Is it possible that the media’s over-glamorization of $75,000 has given people overly lofty expectations for how much their lives will improve? Perhaps, it is our perception of our wealth, and our expectations about how it will boost our happiness, that plays a role in our unhappiness.

A holistic approach

If earning more money is beneficial, does this mean we should spend our time in the relentless pursuit of wealth? Probably not. After all, it remains true that many high-income individuals are not happy with their lives.6 Furthermore, even if we do achieve our financial goals, how long will it take for the hedonic treadmill to pull you back to equilibrium? Clearly, happiness is a fickle thing.

It may instead be beneficial to look at predictors of ill-being than well-being. If your work pays you well, but isolates you from vital social connections, it will likely be detrimental to your happiness.7 If you drive a Mercedes to work, but that work is highly stressful, it is unlikely that you are going to enjoy your drive there in the morning (or the workday that follows). If you are paid well to be a cog in a ruthless, immobile hierarchy, your lack of power could lead to distress.8 If your marriage suffers due to your chaotic business hours, an extra infusion of cash probably won’t fix your issues.

On the flip side, the fact that money increases happiness doesn’t mean that the only useful intervention for low-income people is to obtain more money (though that would obviously be ideal). In original research by TDL, we found that people’s beliefs about their finances can lead people to make worse financial decisions. This creates a vicious cycle, where mounting stress invites more cognitive bias and further impairs financial decision-making. We also found that nudging people to adopt a big-picture view, focusing on their values and long-term goals, could improve financial decision-making and help reduce this stress over time.

Conclusion

Overall, there are no easy answers to this age-old question. Is more money helpful? Of course it is. Can the relentless pursuit of it make you miserable? Again, of course. At the end of the day, we are all joggers on the hedonic treadmill, attempting to make the best out of our baseline level of happiness.

While it may seem obvious, the true solution to our problems is balance. If we cannot fully control how happy we are in the day-to-day, we can at least minimize financial stressors. Build a lifestyle that allows you to grow your income, but also grow your relationships. Find a job that excites you, but also keeps stress levels relatively low. And importantly, don’t expect $75,000 to change your life.

Eco-Anxiety: Friend or Foe?

This week, the United Nations Intergovernmental Panel on Climate Change (IPCC) released a new report on the state of climate science. Clocking in at nearly 4,000 pages long and citing around 14,000 studies, it paints a grim picture of what is on the horizon for humanity and our planet. 

Writing with a level of certainty generally uncharacteristic of scientists, the authors of the report state that it is “unequivocal that human influence has warmed the atmosphere, ocean, and land.” They also argue that recent extreme weather events around the world can indeed be linked to climate change, and that these events will only become more frequent in the coming years unless carbon emissions decrease—and fast. UN Secretary-General António Guterres has called the findings “a code red for humanity.”1 In short: climate change is here, humans are responsible, and urgent action needs to be taken in order to avoid more dire consequences. 

Against a backdrop of heatwaves, forest fires, and flash-floods occurring around the globe, it is becoming clear that in addition to the impact these catastrophes have on our physical health, they are also taking a large toll on our mental health. Needless to say, natural disasters have acute psychological consequences for people who experience them firsthand, including trauma, shock, and post-traumatic stress disorder (PTSD). After Hurricane Katrina, for instance, suicide and suicidal ideation more than doubled in affected communities, over 16% of survivors met the criteria for PTSD, and nearly half of them developed an anxiety or mood disorder.2 As the frequency of extreme weather events rises, so will the prevalence of these symptoms. 

More recently, however, researchers (and therapists) have also seen a rise in a different kind of climate-related anguish. Eco-anxiety, defined as chronic fear of environmental doom, is being witnessed both in people who have been directly impacted by climate change and those who are more removed, but still concerned about the current state of climate (in)action and the future of the environment. 

Amidst this rise in mental distress, one open question is whether increasing levels of eco-anxiety could come with a silver lining: spurring us to take action on emissions. Researchers are currently attempting to determine whether this emotional response is advantageous or mostly harmful, and what variables can make the former outcome more likely. Although research in this field is still in its early stages, few would dispute that this topic is of the utmost importance.

The ups and downs of eco-anxiety

Eco-anxiety (also known as climate anxiety) is more prevalent than one might expect, and is becoming ever more common. According to a recent APA poll, two-thirds of US adults have at least some anxiety or worry about climate change and its effects.

However, certain groups are affected disproportionately. People who rely on land-based activities, including Indigenous communities and farmers, are more likely to experience eco-anxiety as they are at the forefront of the climate crisis. Young people are more affected than older adults, with 47% of young adults in the US reporting that stress about climate change affects their daily lives.

Although eco-anxiety is a perfectly rational response considering the state of our natural environment, whether it could be beneficial in motivating pro-environmental behaviors is still under investigation. Researchers find that for some individuals, habitual worry about global warming may be unconstructive and part of “intrapersonal dysfunction,” while for others it may be constructive response correlated with determinants of pro-environmental behaviors, including past pro-environmental behaviors and a “green” identity.4

To tease apart these different effects, one study separated the concept of eco-anxiety into three sub-components: eco-depression, eco-anger, and eco-anxiety.5 The researchers found that eco-depression and eco-anxiety may contribute to (or at least co-occur with) poorer mental health, while eco-anger was moderately associated with lower anxiety, depression, and stress. 

Which components of eco-anxiety motivated people to act? The results showed that eco-anger and eco-depression were associated with increased engagement in collective pro-environmental action, while eco-anxiety actually predicted lower collective action. Eco-anger was also the only state significantly associated with greater personal attempts to take action. However, Dr. Ashley Cunsolo, a health geographer with a focus on determinants of Indigenous health, warns that although anger regarding climate issues is legitimate and should be supported, from her experience, it may not be sustainable and can cause exhaustion in the long term.6

Walking the tightrope: Managing eco-anxiety while tackling climate change

As we have seen, eco-anxiety can have majorly detrimental effects on our mental health. And while anger about climate change may inspire us to act, it’s not clear that it is healthy or productive to stay eco-angry forever. So, how do we foster a balance between maintaining a healthy level of concern over our planet while avoiding a worsening of the current global mental health crisis? 

First, it is important to keep in mind that moderate levels of eco-anxiety are a completely normal response to the current crisis and may sometimes be helpful in sparking action. At the same time, because of the distress caused by eco-anxiety and other climate-related psychological distress, Dr. Cunsolo suggests we need rapidly scalable solutions to address mental health challenges associated with the environment. These solutions should be integrated into health systems, along with enhanced assessment and support opportunities.

One emerging frontier in eco-anxiety treatment is evidence-informed individual and group therapies. Many people feel isolated and ashamed of their eco-anxiety, and joining a supportive community can help alleviate these feelings. For example, the Good Grief Network offers a 10-step program to build resilience, empowerment, and foster community ties in a chaotic climate.

Dr. Cunsolo also mentions the importance of developing healthy family-oriented responses to this issue due to the degree of its impact on youth. It is also important to note that groups experiencing eco-anxiety often also have poorer access to mental health resources, which is why a health equity approach is necessary to address this issue.8

The importance of building resilience

Eco-anxiety may sometimes lead us to engage in activism and pro-environmental behaviors, but whether these things can in turn alleviate our anxieties is a topic still up for debate. Some researchers argue that symptoms of eco-anxiety can be reduced through actions that address the underlying threat, especially collective action. 

However, climate-aware psychotherapist Caroline Hickman argues using only this coping mechanism paradoxically risks making us less resilient.9 She states that jumping from distress straight to action removes the opportunity to build a tolerance for anxiety and other unpleasant eco-related emotions.10 Making time for “internal activism”—processing our emotions related to the climate crisis—is just as important as “external activism.”10 This processing can help us deal with inevitable emotional challenges and help avoid burnout while taking action.

Many emotion-processing techniques can be used to alleviate eco-anxiety, including mindfulness practices coming from Buddhism or the aforementioned group therapy practices. Dr. Jo Hamilton recommends using Emotional Methodologies (EMs), which (like mindfulness and other types of emotional processing) focus on reflexivity.10 EMs create opportunities for acknowledging and supporting painful emotions, helping people process them and recognize their capacity to take action. Hamilton’s research finds that EMs allow people to take action more deeply and sustainably.

Conclusion  

Although eco-anxiety may be helping us take action against climate change, we must be prepared to support a growing community of eco-anxious individuals and help them manage their psychological distress. Mental health systems and policy-makers must recognize that this is a growing threat, and practitioners should be ready to validate and respond to these emotions in their clients—especially individuals who come from marginalized groups most affected by climate change.

Unfortunately, too often, people feel isolated in their climate concerns and try to deal with the issue on their own. If you’re grappling with climate anxiety, know that you have many options of support available to you at various levels of care. Although it may take time to find the option that works for you, it might just be what allows you to feel optimistic and take meaningful action in this very important moment.

How Diversity Statements Backfire—and What Organizations Can Do About It

Scroll to the bottom of any job posting, and you’ll likely find some version of the following paragraph: 

“[Corporation name] is an equal opportunity and affirmative action employer. We are committed to equal employment opportunity regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity, or Veteran status.” 

Such affirmative messages are called “diversity statements.” They’ve become a compulsory feature of hiring since diversity, equity, and inclusion (often abbreviated as DEI) became the latest buzzwords to enter the corporate lexicon. 

There’s a moral case for these messages: valuing everyone equally is good. But there’s an even more compelling business case. Since job-seekers tend to lean left and are egalitarian-minded, pro-diversity messaging is good for optics and attracts a larger volume of potential hires. Further, if these messages do, inadvertently or not, increase workplace diversity, companies will reap the additional benefits: more qualified job candidates, more innovation, more creativity, and a better understanding of diverse target demographics.1 

Are diversity statements effective? That depends on what metrics you care about. For most companies, these statements do indeed bolster brand image. But do they actually help increase the diversity of their workforce? According to recent DEI reports, probably not. 

The reality is that these statements are often corporate lip service, merely band-aiding discriminatory hiring practices. At their worst, however, they’re not merely benign messages—they can actually cause harm to minority job seekers. Here, I’ll diagnose the 3 major issues with diversity statements and present innovative solutions that draw from the latest behavioral science research.2

Issue 1: Diversity statements can create an illusion of meritocracy 

Companies like to label themselves “equal opportunity employers” in their diversity statements in order to attract diverse hires. However, these labels can create an overly optimistic impression of a company’s commitment to fairness, and seem disingenuous to those whose experience proves otherwise. Such bold declarations of equality, research also shows, can encourage discriminatory behaviors by creating an illusion of meritocracy. 

In an empirical article entitled “Presumed fair: Ironic effects of organizational diversity structures,” social psychologist Cheryl Kaiser and her colleagues ran a series of experiments on White participants. One group read a description of a company that included a diversity statement, while the other group read about a company whose description did not include such a statement.3 

When the researchers showed participants clear evidence of discrimination in each company’s promotion rates (with 28% of White and 10% of racial minority employees receiving promotions), participants who read the diversity statement rated the company as acting more fairly toward racial minority employees than participants who did not see a diversity statement. This illusion of fairness can trivialize minority employees’ complaints of discrimination. 

In a follow-up study, the two groups read a scenario wherein a Black employee sued the company for discriminatory promotion practices. The diversity statement group was less sympathetic to this employee and less likely to regard the suit as valid. Both studies point to an insidious consequence of diversity statements: by creating an impression that equality is already achieved, organizations can inadvertently prompt employees and hiring managers to ignore or downplay disparities in outcomes.

Solution 1: Frame diversity statements as aspirations rather than declarations

If organizations stating they’re an “equal opportunity employer” can backfire, how else should they express their commitment to diversity? According to research by management professor Michelle Duguid and Airbnb’s current Vice President of Diversity and Inclusion Melissa Thomas-Hunt, we should frame diversity messaging as aspirations rather than declarations.4 Instead of saying you are a pro-diversity employer, say you strive to be one. 

A diversity statement that emphasizes striving could sound something like this: “The vast majority of people in our organization are working hard to achieve a welcoming, diverse, and inclusive environment.” 

Not only do statements like this sound more sincere (because they acknowledge the existence of racial biases), but they also frame these biases as something malleable rather than something fixed. In other words, instead of assuming that somebody is either racist or not racist, they make room for the understanding that biases exist even in well-intentioned people, and that these biases can be changed with some amount of effort. 

Embracing a growth mindset in this way may help us avoid becoming defensive when faced with our own mistakes or shortcomings. This, in turn, can make us more likely to actually achieve our goals. 

Issue 2: Diversity statements can sound too controlling

Sometimes, diversity statements include forceful messages such as a “zero-tolerance policy” towards racism, or expect all employees to commit themselves to “stopping racism.” While it’s important that policies and expectations are in place to uphold workplace equality, such authoritarian statements can actually discourage anti-racist efforts.

In 2011, social psychologist Lisa Legault and her colleagues demonstrated that the way organizations frame diversity messages— especially whether they emphasize authority or autonomy—matters.5 To do this, they randomly assigned non-Black undergraduate students to read brochures framed as part of a new campus initiative to reduce racial bias. These brochures would either emphasize personal choice (e.g. “I enjoy relating to people of different groups”; “it’s fun to meet people from other cultures) or social norms (e.g. “it’s socially unacceptable to discriminate based on cultural background”; “I should avoid being racist”). 

When tested, students who read the autonomous message showed less bias against Black people and greater motivation to be unbiased in the future. In a follow-up study, they further demonstrated how differing messages altered participants’ subconscious biases: those prompted with “autonomous” diversity messages scored lower on implicit anti-Black bias measures than those who read “authoritative” diversity messages. It’s reverse psychology: tell people they mustn’t be racist, and they become more likely to act racist. 

Solution 2: Emphasize personal autonomy in diversity messaging 

Diversity statements shouldn’t include “musts” or “shoulds.” Instead, they should make it seem that employees value diversity because they have personally chosen to value diversity.1 For example: “our employees and management value diversity because we enjoy relating to people from different groups, we have fun meeting people from other cultures, and think diverse perspectives are interesting and critical to our mission.” 

Emphasizing personal autonomy allows the statement to sound genuine rather than forced. We value diversity because we want it, not because it’s a business requirement.    

Issue 3: Diversity statements often don’t reflect pro-diversity hiring practices

I want to highlight something critical: diversity statements can only do so much. They must never replace substantive changes to how the organization’s hiring procedures operate, because biases are ingrained in the way we think. What happens if corporations merely include diversity statements in their job postings, but don’t enact real changes to create diversity? 

If, like me, you bear a foreign-sounding legal name (mine is “Lok Sang Jeffrey To”), in the past, you might’ve either bracketed the foreign parts (“(Lok Sang) Jeffrey To”) or removed them entirely (“Jeffrey To”) on your resume. You might’ve engaged in similar excisions for your organizational affiliations, like dropping the “Black” in “Black Engineering Students’ Association.” This act of “résumé whitening”—removing ethnic cues to appear more White—is common practice among minorities due to fears of hiring discrimination. 

In a 2016 study led by Sonia Kang, professor of Organizational Behavior at the Rotman School of Commerce, it was found that when ethnic minority candidates applied to job postings that included diversity statements, they were half as likely to engage in résumé whitening than when not shown these statements.6 

But do companies with diversity statements actually hire diverse candidates more often? To answer this question, Kang and her colleagues sent out over a thousand résumés—half whitened and half with candidates’ ethnic cues retained. They found that ethnic minorities with whitened résumés were more likely to get a callback, when compared to ethnic minorities with un-whitened résumés. Surprisingly, this pattern was maintained regardless of whether a company’s job posting presented a diversity statement. In other words, employers with diversity statements often don’t walk the talk. And if these statements encourage minority job candidates to disclose racial information, they might hurt rather than help their chances of getting the job. 

Solution 3: When it comes to DEI, show, don’t tell

Clearly, we need innovative hiring procedures that disrupt these biases—during and before hiring decisions.

One solution to hiring discrimination is “blind recruitment,” which involves subtracting any personal identifiers from the applicant’s résumé and other application documents. This process removes name, gender, age, and education level from the equation, leaving qualification as the sole metric.7 

Blind recruitment is steadily gaining traction: organizations including Deloitte, HSBC, KPMG, Google, and the BBC have committed to the practice. New technologies also makes it easier to implement blind recruitment in hiring: GapJumpers, for example, hides candidates’ names, faces, and personal information from employers during the initial hiring stages to reduce potential bias. The company numbers suggest that, compared to standard resume screening, the use of blind recruitment increases the chances of minority and female applicants being offered a first-round job interview by around 65%.

Conclusion 

Too often, people and organizations are content with superficial gestures towards social progress and equality, in the absence of any concrete change; diversity training, which studies have long shown to be ineffective, is another example of this pattern. That’s not to say that these interventions are all bad. If they’re tailored to evidence-based recommendations, and if they accompany structural changes that aim to mitigate biases, they can help increase diversity. But, as we’ve seen, when companies include them merely for optics or to hitch a ride on the corporate diversity bandwagon, they can actually do more harm than good. 

If organizations are serious about promoting diversity and equality, they need to move past these empty gestures towards substantial, data-driven approaches recommended by DEI scholars and experts. We as individuals also need to be more critical of companies who make claims to progressiveness without the numbers to back it up. It takes more than diversity statements to make the workplace diverse and inclusive.