I recently read an article written on the Harvard Business Review that combined the works of multiple researchers such as Edward Deci and Tim Judge and summarised their findings on the topic of money, specifically, our income and whether or not research actually proves that, as perceived by many, the higher your income, the happier you will be and the more motivated you are to work hard. In fact after 120 years of research including 15,000 individuals, statistics show that shockingly, there is in fact a mere 2% overlap between levels of job satisfaction and how much you earn and what’s more, these results were repeated when the study was carried out across many countries of varying development levels, such as India and the United States. In addition to this, it was also discovered that the very high earners reported similar satisfaction levels to some of lowest earners.
But what does this all mean? In our current day and age it is widely believed that money is one of the biggest motivators and means of incentivising people to work and be as productive as they possibly can be, but on studying the research that has been carried out around this topic, it begs the question, if money doesn’t incentivise people to work, then what does, and if money can’t make us happy, then what’s the point of it?
Well in short, the answer is bills. Money pays bills. It also pays for food, mortgage, rent, the list is endless and although it is true that, in general, money doesn’t make you happy, it does, up to a certain point. Beyond that point, your happiness levels cease to increase as each extra pound you earn becomes less valuable. The way in which this has been proven is through research on income levels and overall contentment. In a paper by Daniel Kahneman and Angus Deaton, it was found that emotional well-being levels increase with salary levels up to a salary of $75,000 in the US but that they plateau afterwards, in the UK the income that equates this outcome is £47,000. It is at this level that the cost of living is covered, and individuals can afford to live “comfortably” so to speak, i.e. own a house and car, go on holiday annually, and so on. This means, and only makes sense that those who are on low incomes are those on whom money can be utilized as an incentive via bonuses for example, as each pound is of greater value to them as they are far below the income level which enables you to cover your cost of living and have some disposable income.
But money also comes with its disadvantages. It was found that people who used money as a motivator to work hard and as their main focus, their interest levels in their job decreased as did their intrinsic motivation levels, leading to a lack of focus on nurturing intellectuality and other skills- the things that, in reality, make an individual perform best. On the other hand, people who have chosen jobs based on a genuine interest in the subject, regardless of its pay and equally do not use money as an extrinsic motivator, their levels of intrinsic motivation increase further as do job satisfaction levels. In fact in a large meta-analytic review of 25,000 individuals, their personality determined 40% of the irregularity in job satisfaction ratings. It was concluded that the more emotionally stable, extraverted, agreeable or conscientious they were, the more they tend to like their jobs, regardless of their salaries.
These studies bring to light how clouded and essentially mistaken our views are when it comes to money, motivation, job satisfaction and how the three interplay. It also raises awareness of a slightly more daunting fact and that is that in some sense, our economy is skewed as we are using the wrong methods to incentivise the wrong people which begs the question- is our workforce as productive as it could be? We live in a society which is becoming ever more materialistic and money orientated, with many individuals adopting the belief that higher salary means more motivation and therefore job satisfaction which, as discussed above, is not the case. What’s even more worrying is businesses approaches to bonuses- those big, fat six-figure tips that are given to some of the highest paid job holders just in case their half a million pound and over salaries weren’t quite enough. In that respect, bonuses don’t work. Yes, they work very nicely to incentivise low-interest, repetitive tasks for which employees get paid minimum wage or just above, but there is research evidence to suggest that they don’t produce the desired results for more complex activities. Indeed, experiments have shown that individuals who are ‘motivated’ by the prospect of financial reward actually do worse at complex cognitive tasks than those without the benefit of an incentive and as previously discussed, these high earners have reached the plateau whereby each extra pound becomes less and less valuable to them.
The final question we must ask ourselves is what can we conclude? Well, we can boil them down to five points:
- Seek a job that genuinely interests you and develops your skills and intellectuality
- If you wish to be successful and satisfied in your career, forget extrinsic motivators and instead, focus on intrinsic ones
- Unless you earn less than 47 grand, money should not be used as an incentive to work harder
- Regardless of what others say, know that higher pay does not equal happier.
- Finally, tangible rewards are not what motivated people all throughout history to make changes to society, fight for the rights of other individuals and give a voice to those who were silenced. It was the desire to help others and lay the path for a fairer, freer and greater world on which future generations can walk.