The amount of money a person earns per year correlates to happiness. But just how much money a person needs to earn in order to achieve a satisfactory level of happiness has been a matter of debate for years. A new analysis by Doug Short, vice president of research at investment group Advisor Perspectives, indicates that the answer really depends on the state in which a given individual lives.
The Huffington Post reports Short’s analysis indicates that one of the most expensive states to live — Hawaii — also requires the greatest annual income to achieve happiness — $122,175. Mississippi, which has a relatively low cost of living requires only $65,850 per year to reach an optimal level of happiness.
Those figures don’t necessarily mean that people living in those states and making less are unhappy. The numbers simply mean that making anything above the optimal figure has no appreciable effect on increasing happiness.
Prior to Short’s analysis, it was believed the magic happiness income was $75,000 per year. That number came from a widely publicized Princeton study that relied on Gallup surveys of 450,000 Americans.
According to the Wall Street Journal, which reported on the study in 2010, the Princeton researchers indicated that those making more than $75,000 would not see their day-to-day contentment raised with increased income. However, the study did indicate that making more money per year could increase one’s “life assessment.”
Short arrived at his state-based numbers by taking the $75,000 benchmark from the Princeton study and adjusting it according to cost-of-living data for each state, taken from the Council for Community and Economic Research.
The results show that 29 states, mostly in the South and Midwest, still fall below the $75,000 benchmark. Only the District of Columbia and Hawaii top $100,000. New York and Alaska came in at $99,150 and $98,850 respectively.
Short defends his use of the 2010 benchmark, given that it was based on data from 2009. He argues that, although cost of living has gone up and wages have remained stagnant, happiness is “influenced by how we see ourselves in relation to others.” So even though today’s dollar doesn’t buy as much, people are happy because everyone is in the same boat. He cites a University of Michigan consumer sentiment index to bolster his claim — arguing that consumers have a more positive mood than they did in 2009, at the lowest point of the recession.
Here's a map to illustrate the Happiness Benchmark, courtesy of The Huffington Post:
And here is a chart to illustrate the specific incomes, courtesy of Advisor Perspectives:
Photo Source: Wikimedia