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

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

By Jeffrey Pfeffer, Sanford DeVoe
2009Working Paper No. 2024

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 someones 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
hourly wage, income, organizational payment