The Price of Happiness

Money can buy happiness. But you get more happiness “bang” for each buck if you’re paid hourly than if you’re on salary, according to new research from Sanford E. DeVoe, a professor of organizational behavior at the Rotman School of Management.

Although the relationship between money and happiness has been controversial, research suggests that money does have at least some effect on happiness – the more you have, all else being equal, the happier you are.

DeVoe and Jeffrey Pfeffer at Stanford University wondered if the way you get paid might also make a difference. They figured that people getting paid by the hour are more likely to think about money on a regular basis, so money might have a greater affect on their happiness.

“You get persistent reminders about your pay. You have to fill out a timesheet, you look over your paycheck,” said DeVoe. Salaried employees, on the other hand, don’t have their pay drawn to their attention as often.

So DeVoe and Pfeffer crunched numbers from three previous surveys. They found that dollar for dollar, pay affected the happiness of people who were paid hourly more than the people who were paid in salary.

To confirm the relationship, they gave people a standard happiness test, which asked them about the conditions of their life and had them rate how happy they were. Half of the people taking the test were also asked to calculate their hourly wage first.

As expected, for people on salary who first calculated their hourly wage, money had a stronger impact on their happiness than it did for salaried workers who didn’t do the calculation. On the other hand, for people paid hourly there was no difference if they first did the calculation or not. They already knew what they made in an hour.

The study did not determine if the relationship was reversed at the low end, DeVoe said. It might be that if you’re being paid badly, an hourly wage that draws your attention to the fact will make you unhappier than if your crummy pay is disguised by a salary.