Arthur C Brooks in The Atlantic:
In 2010, two Nobel laureates in economics published a paper that created a tidal wave of interest both inside and outside academia. With careful data analysis, the researchers showed that people believe the quality of their lives will increase as they earn more, and their feelings do improve with additional money at low income levels. But the well-being they experience flattens out at around $75,000 in annual income (about $92,000 in today’s dollars). The news materially affected people’s lives—especially the part about happiness rising up to about $75,000: In the most high-profile example, the CEO of a Seattle-based credit-card-payment company raised his employees’ minimum salary to $70,000 (and lowered his own salary to that level) after reading the paper.
This January, another economist published a new paper on the subject that found that even beyond that income level, well-being continues to rise. That’s not to imply (as much of the popular press did) that money can buy happiness off into infinity. The new study simply suggests that the drop-off occurs, on average, at higher income levels. I graphed the raw income data from the study and found that happiness flattens significantly after $100,000; at even higher levels there is very little extra well-being to be had with more income.
The lesson remains the same as it was a decade ago: At low levels, money improves well-being. Once you earn a solid living, however, a billionaire is not likely to be any happier than you are. Yet for the most part, this truth remains hard for people to grasp. Americans work and earn and act as if becoming richer will automatically raise our happiness, no matter how rich we might get. When it comes to money and happiness, there is a glitch in our psychological code.
Understanding this can help us build happier lives. Even further, it uncovers strategies for using income at all levels to raise well-being.