Happiness, Income Satiation, and Turning Points Around the World

Abstract

Income is known to be associated with happiness, but debates persist about the exact nature of this relationship. Does happiness rise indefinitely with income, or is there a point at which higher incomes no longer lead to greater well-being? We examine this question using data from the Gallup World Poll, a representative sample of over 1.7 million individuals worldwide. Controlling for demographic factors, we use spline regression models to statistically identify points of “income satiation.” Globally, we find that satiation occurs at 95,000forlifeevaluationand95,000 for life evaluation and 60,000-$75,000 for emotional well-being. However, there is substantial variation across world regions, with satiation occurring later in wealthier regions. We also find that in certain parts of the world, incomes beyond satiation are associated with lower life evaluations. These findings on income and happiness have practical and theoretical significance at the individual, institutional, and national levels. They point to a degree of happiness adaptation and that money influences happiness through the fulfillment of both needs and increasing material desires.

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Letters
https://doi.org/10.1038/s41562-017-0277-0
© 2018 Macmillan Publishers Limited, part of Springer Nature. All rights reserved. © 2018 Macmillan Publishers Limited, part of Springer Nature. All rights reserved.
1Department of Psychological Sciences, Purdue University, West Lafayette, IN, USA. 2Department of Psychology, University of Virginia, Charlottesville,
VA, USA. *e-mail: ajebb@purdue.edu
Income is known to be associated with happiness1, but
debates persist about the exact nature of this relationship2,3.
Does happiness rise indefinitely with income, or is there a
point at which higher incomes no longer lead to greater well-
being? We examine this question using data from the Gallup
World Poll, a representative sample of over 1.7 million indi-
viduals worldwide. Controlling for demographic factors, we
use spline regression models to statistically identify points
of ‘income satiation’. Globally, we find that satiation occurs
at $95,000 for life evaluation and $60,000 to $75,000 for
emotional well-being. However, there is substantial variation
across world regions, with satiation occurring later in wealth-
ier regions. We also find that in certain parts of the world,
incomes beyond satiation are associated with lower life evalu-
ations. These findings on income and happiness have practical
and theoretical significance at the individual, institutional and
national levels. They point to a degree of happiness adapta-
tion4,5 and that money influences happiness through the fulfil-
ment of both needs and increasing material desires6.
The relationship between money and happiness has been con-
templated—and contested—for hundreds of years. Large-scale
reviews have consistently shown that income is positively associated
with subjective well-being (SWB)1,7–9, but one issue in need of clar-
ity is whether there is an eventual ceiling to these positive effects.
In other words, is there a level of income at which satiation occurs,
when increases in income no longer produce meaningful benefits
to happiness? Or, does happiness continue to rise indefinitely with
income gains?
Many studies have examined the association between income
and one or more of the three components of SWB (that is, life
evaluation, positive affect and negative affect10). These studies have
observed that the strength of the association diminishes with higher
income. However, despite its importance, only a few studies have
examined explicitly whether this diminishing eventually reaches full
satiation, and those that do exist have noteworthy limitations. The
most prominent study to date looked at satiation for all three SWB
outcomes and found that life evaluation did not satiate, whereas
affective well-being satiated at $75,0002. However, the study sample
was limited to the United States and only used a categorical measure
of income rather than a continuous one. Determining satiation from
categorical data is possible but will not yield precise estimates of its
true location. (Technically, the $75,000 estimate could have been
anywhere between $60,000 and $120,000.) Two other studies found
no evidence for satiation when using a continuous income vari-
able and data from many different countries3,11. However, only one
SWB outcome (life evaluation) was analysed, and only a minority
of the countries tracked the association beyond $64,000 (due to the
authors excluding the upper 90% of income distributions, possibly
due to sparse data). Importantly, all of these studies appeared to use
raw household income. The problem is that this does not account
for household size and therefore assumes that $75,000 for a lone
individual operates the same as $75,000 for a family of four. This
would have the effect of inflating satiation estimates.
Although previous research has shed important light on income
satiation, there is a need for a more thorough investigation that
includes all three SWB outcomes and a sufficient range of continu-
ous income data. Satiation is also not likely to be invariant across
different cultures, time frames and life circumstances12. Thus, apart
from the need to have a broader dataset, another pivotal question in
need of exploration is: How might various factors like world region,
gender and education influence satiation effects?
We addressed this diverse set of questions using data from the
Gallup World Poll, which contains observations collected from over
1.7 million people from 164 countries and approximates a world-
wide-representative sample of adults aged 15 and older. We found
that satiation is a worldwide phenomenon but varies considerably
based on SWB type, world region and education. These results
carry important implications for stakeholders at multiple levels.
Individuals often feel strong pressures to achieve high incomes13,
and establishing points of satiation might advise their chosen aspi-
rations and values. For organizations, an understanding of satiation
effects might inform employee pay structures14, and for govern-
ments, it can help motivate policies directed towards wealth redistri-
bution15. Establishing satiation points also enriches our theoretical
understanding of the relationship between income and happiness,
which is often contested as either providing the fulfilment of needs
(the human needs model9, where income leads to SWB) or desires
(the relative standards model6, where income does not lead to SWB
or even leads to decrements in SWB). The presence of satiation
would point to different income ranges in which these theoretical
accounts function.
In our analyses, the income variable was yearly household equiv-
alized income—a measure that can be interpreted as US dollars
and controls for the number of individuals within a household (see
Supplementary Table1 for descriptive statistics and Supplementary
Methods for more details on this income variable). We fit spline
regression models16 to the data and then located the point at which
the slope of log income reached zero when regressed on SWB after
controlling for relevant factors. We then conducted confirmatory
hypothesis tests using Bayes factors17 to compare the SWB level at
satiation against the SWB of all higher incomes. The Bayes factor is
the Bayesian alternative to the P value, and it allowed us to quantify
support for the null hypothesis of no income difference (as opposed
to the P value, which can only fail to reject the null). The Bayes fac-
tor can be interpreted as how many times more likely a particular
hypothesis is compared with its alternative17,18. For all Bayes factors
Happiness, income satiation and turning points
around the world
Andrew T. Jebb1*, Louis Tay 1, Ed Diener2 and Shigehiro Oishi2
NATURE HUMAN BEHAVIOUR | VOL 2 | JANUARY 2018 | 33–38 | www.nature.com/nathumbehav 33
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