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Can money buy happiness? UC Berkeley researchers find surprising answers

– Few would disagree that, to a certain extent, money brings happiness. But according to researchers at University of California, Berkeley, once enough is earned to meet basic needs, money in relation to happiness is a very personal equation.

In fact, employees who are primarily motivated by the love of their work become less happy the more money they make.

Psychology PhD candidate Ariel Malka and Haas School of Business professor Jennifer Chatman posed the question: Does the effect that money has on happiness differ between individuals? Specifically, depending upon work values, does one's level of income impact his or her feelings about life?

Malka and Chatman's findings are published in the June issue of the Personality and Social Psychology Bulletin.

They conducted a study using a sample of 124 UC Berkeley MBA graduates who participated in an MBA Assessment Project conducted by UC Berkeley's Institute of Personality and Social Research.

Between 1986 and 1991, those participants completed initial surveys while still in graduate school assessing, among other things, work values. In 1995, four to nine years after completing the surveys, participants completed another survey to measure several psychological and work-related variables, including measures, at the time, of their well-being, job satisfaction and annual income.

The researchers' findings lend strong support for the idea that the way money impacts happiness does indeed depend on the individual.

"First of all," said Malka, "we found that income had a positive relationship with both well-being and job satisfaction for individuals high in extrinsic orientation. That is, if money is what you value, then money, indeed, will make you happy."

"However," he continued, "we found a more surprising pattern regarding intrinsic orientation. Specifically, for those high in intrinsic orientation, money actually had a negative effect on well-being. In other words, among those who had a relatively strong tendency to value work because they enjoyed it or it fulfilled them, those making more money were actually less happy than those making relatively little money."

"In a capitalistic society, people generally believe that - all other things being equal - being rich is better," Chatman added. "But that is not what we found."

The researchers offered two potential explanations for their findings.

"Earning a lot of money might, to some extent, be a marker of having chosen a job based on what it pays, neglecting factors such as how fulfilling it is," Malka said. "We suspect that neglecting these intrinsic factors would be harmful to a person's happiness. Conceivably, this detrimental effect is especially strong for those who have strong intrinsic work values in the first place."

The researchers' other explanation seemed to them less intuitive, but grounded in previous research.

"Perhaps making a lot of money in your job can actually cause you to question why you are working at the particular job you have, even if you chose the job for intrinsic reasons," Malka said. "There's a substantial psychological literature showing that receiving monetary rewards for doing a fun task can make the task seem less enjoyable. This past research suggests that your sense of how fulfilling and personally rewarding you find a task is very fragile, and money can shake this delicate sense of enjoyment."

"Individuals have a fundamental psychological need to feel as though their actions are freely chosen," the authors wrote. "In other words, we all need to feel that we are not just doing the work for the money, and intrinsically motivated individuals need to feel this even more so," Chatman added.

While the researchers believe their research has relevance in the real world, they cautioned that sweeping generalizations from their findings should not be made.

"This research was conducted with a relatively high income sample - mostly white individuals who attended a top-tier MBA program," Malka said. "We would not expect income to have a negative relationship with well-being for any type of person, regardless of their values, within a lower income sample."

Past research, he explained, has shown that the effect of income on well-being is actually quite strong among those who make less money, because within these people, differences in income translate into differences in how well basic needs are met.

"However, further up the income ladder, at the levels where basic needs are satisfied, the effect of income on well-being diminishes," he continued. "It is at these higher income levels that we expect higher order psychological needs - such as those represented by intrinsic orientation- to have implications for how income affects happiness."

The researchers believe their study contains important lessons.

Managers, for example, should not let the extrinsic rewards they give employees, such as raises, better offices or bonuses, be used " to displace or undermine the natural intrinsic rewards people get for doing the work itself," said Chatman.

The research also raises questions individuals should ask themselves when they investigate career paths.

"When prioritizing life goals, people should think carefully about which outcomes will have the strongest effect on their well-being and allocate their efforts accordingly," Malka said. "Also, people should be aware of how organizing their lives around making money can have implications for their other values. For example, will having lots of money impact your well-being enough to justify you spending 12 hours a day, every workday, doing something you hate?"