Getting a Raise Means More Money, But Not Always More Happiness
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This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise.
Here's your money briefing for Wednesday, January 17th. I'm J.R. Whelan for The Wall Street Journal. People often say having more money would make them happier. And while getting a raise at work can brighten your day, that feeling of happiness is often short-lived.
We often dwell on one thing changing in our lives and how that would make us happier. But even if you got a big raise, you might still have some of the same annoyances at work. Or even if you switch jobs, you may have the same conflicts with family members at home.
We'll talk to Wall Street Journal personal finance reporter Joe Pinsker after the break.
This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise.
More money in your paycheck doesn't always translate to more happiness in your life.
What is the episode’s premise about raises and lasting happiness?
Wall Street Journal personal finance reporter Joe Pinsker joins me. So, Joe, a lot of people have gotten raises in the past several years as they've changed jobs. Are you here to tell us that money isn't everything?
No.
I'm not sure if people really need me to be the one to tell them that as it isn't exactly breaking news. But yes, many people have gotten some pretty hefty raises over the past few years. Median year-over-year wage growth hit a recent high of 6.7% in the summer of 2022 based on data from the Atlanta Fed. And a lot of people added tens of thousands of dollars to their annual compensation.
But wouldn't being told you're getting a raise give some people at least a bit of happiness?
Oh, it certainly does. I want to be clear about that. And for many people, that is the case. Higher incomes are in general correlated with more happiness. But there are some interesting patterns that come up when you talk to individual people about how a big raise went for them. I was talking with one woman who's an accountant in the Chicago area who was saying that, you She got a big raise. It felt great. And she booked a vacation the next month. But not long after coming back, the feeling had kind of faded for her and she'd reverted to some sort of baseline that she had of happiness.
We're in an era where workers are comfortable talking about their salary with other co-workers. How much does that contribute to this ebbing of happiness, even in the face of getting a raise?
The way we feel about our pay definitely has a lot to do with how it compares to the people around us. Those may be coworkers, those may be friends. We're sort of looking around at our peer groups to see if we're happy with our pay or not. So to the extent that sharing salary information might make people feel bad, that's definitely a consideration, though there's a lot to be said for salary transparency, just in terms of sharing information, making sure people know how much would be fair pay for the work that they do.
How does where someone is in their income scale affect their happiness when they get a raise?
Pay raises can make a huge difference to people, especially at lower ends of the earning spectrum. And if you're moving from financial stress to financial comfort, a raise can be awesome. That's something that's come up in several interviews I've done lately with people who got a big raise. One interesting note is that as you move up the income scale, it takes more and more money to generate the same boost in happiness that you see when you look at the correlations in the data. So getting a $20,000 raise might not bring you as much happiness if you're making $100,000 than if you're making $40,000.
For people who do get that feeling of happiness when they get a raise, how do financial planners say they should put that feeling of elation to good use?
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