When is Happiness About How Much You Earn? The Effect of Hourly Payment on the Money-Happiness Connection

48 Pages Posted: 17 Jun 2009

See all articles by Sanford E. Devoe

Sanford E. Devoe

University of Toronto - Joseph L. Rotman School of Management

Jeffrey Pfeffer

Stanford Graduate School of Business

Date Written: May 1, 2009

Abstract

We argue that the strength of the relationship between income and happiness can be influenced by exposure to organizational practices, such as being paid by the hour, that promote an economic evaluation of time use. Using cross-sectional data from the US, two studies found that income was more strongly associated with happiness for individuals paid by the hour compared to their non-hourly counterparts. Using panel data from the United Kingdom, Study 3 replicated these results for a multi-item General Health Questionnaire measure of subjective well-being. Study 4 showed that experimentally manipulating the salience of someone’s hourly wage rate caused non-hourly paid participants to evince a stronger connection between income and happiness, similar to those participants paid by the hour. Although there were highly consistent results across multiple studies employing multiple methods, overall the effect size was not large.

Keywords: income, subjective well-being, hourly wage, organizational payment practices

JEL Classification: M10, M12, M52, M50

Suggested Citation

Devoe, Sanford E. and Pfeffer, Jeffrey, When is Happiness About How Much You Earn? The Effect of Hourly Payment on the Money-Happiness Connection (May 1, 2009). Stanford University Graduate School of Business Research Paper No. 2024, Available at SSRN: https://ssrn.com/abstract=1420893 or http://dx.doi.org/10.2139/ssrn.1420893

Sanford E. Devoe (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Jeffrey Pfeffer

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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