Can money buy employee happiness? In the first of a series on recent
research surrounding big HR themes, Stephen Overell looks at the evidence and
explores alternative ways of boosting staff morale
Gordon Bethune, chairman and CEO of Continental Airlines, recently returned
to his alma mater, the Jones Graduate School of Management, Texas, to let fly
some pearls of wisdom to star-struck MBA students.
He described his tactics for turning around the company, which had suffered
dire industrial relations, poor customer service and an atmosphere of perpetual
financial crisis. His aim, he told them, was to enable employees to "find
happiness at work". How? Monthly $100 bonuses for hitting targets, and
periodic giveaways of Ford Explorers for epic individual performance. It
Rhetorical schmooze aside, his remarks will probably strike readers as
either plain common sense (more money means people’s satisfaction with their
lot improves), or big-headed folly (money can’t buy happiness). But, alas, it’s
not so simple. Indeed, some economists would suggest that if happiness were
really the intention, Bethune might have been better advised to slash his workers’
salaries in the name of their well-being.
Does money matter?
The root of the problem is that whenever people are asked what would make
them happier, they answer in economic terms, placing money above both health
and family. Yet academic research into the relationship of income to happiness
have not always confirmed their choice.
In one study1, researchers asked 1,000 relatively well-off people to rate
themselves on a happiness scale of one (miserable) to five (joyous) with three
being ‘can’t complain’. They found the less well-off happier than the
Such a counter-intuitive result is not borne out by the big national
household surveys on happiness. In both Europe and the US, rich people are
happier than poor people, as is to be expected.
Yet there are idiosyncrasies. Professor Richard Easterlin of the University
of Southern California argues that if rich people are happier than poor, it
might logically be expected that gains in income would make people happier,
with happiness rising over a lifetime in line with increasing income. But that
wasn’t the case2.
Further, when national comparisons are analysed, the results are depressing.
On accepted measures of happiness (getting people to rate their feelings)
happiness peaked in most of Europe in the early 1960s and in America in 1957.
Since then it has remained fairly stable or declined, despite massive rises in
income. Only France has become happier.
According to a study by two Swiss economists3, international comparisons
show Austria as one of the unhappiest countries, significantly unhappier than
Andrew Oswald, a professor at Warwick University, and the godfather of
‘happinomics’ takes the traditional view – that money does indeed bring
happiness. His work into the recipients of windfalls, such as lottery winners,
has found that £1,000 can lift an outlook, while £1m harvests permanent
jouissance. Yet, even here, there are grim eccentricities: the most unhappy
workers are middle-aged, have a university degree, work for a big company and
have been in their job for a number of years4.
How are we to explain this? Both professors Easterlin and Oswald put this
down to aspiration rising with income: we have more, we want more. We are
prisoners of an insatiable appetite for material wealth, with graduates in
particular suffering constantly inflating aspirations.
Samuel Johnson got it right: "Life is a progress from want to
want," he wrote, "not from enjoyment to enjoyment".
The fantasy of both professors is that some kind of co-ordinated slowdown,
taking the benefit of increased wealth as increased leisure might result in
greater happiness – one potential explanation of why France, with its
shortening work hours, is happier.
Obviously, it would be preposterous for Bethune to cut pay to cheer people
up. But if the relationship of income to happiness is a little fuzzy, it does
raise the practical question of whether staff can contribute to such a
metaphysical thing as happiness.
It appears the answer is a tentative ‘yes’. Despite happiness going down and
income going up, among the British workforce generally, there is a fairly
positive attitude to work – although it has declined slightly over recent
Pinning down the essence of work satisfaction is easy, and forms a venerable
tradition reaching back to the 19th century social reformers. Yet the
intriguing implication of some of the modern research is that certain work
practices can add to greater life satisfaction.
Oswald suggests that the more autonomy workers have in their roles and over
the tasks they do, the happier they are. The tighter the control over how a job
is done, especially if there is control exerted over the pace of work, the
lower measures of life satisfaction are likely to be.
Naturally, work is just one aspect in a complicated cocktail of ingredients
for life satisfaction. Yet the CIPD has also detected a relationship between
many of the concepts that make up the bread and butter of HR departments and of
Employers have little control over whether people are single or divorced, a
major cause of life unhappiness. But they do have some control over other key
factors in life happiness: a supportive climate at work, a positive
psychological contract, a sense of employability, participation in decisions
and autonomy in how they do their jobs.
Work spills directly into life as far as happiness is concerned. HR
practitioners hoping to radiate beneficence into the world should know what to
do. The bad news is that for them, personally, a poor happiness rating seems to
be their destiny. Managers and graduates are not happy – possibly because of
that constant pricking of aspiration.
Given that management does affect happiness so acutely, it is tempting to
speculate that certain jobs have an inherent quality – a measurable impact on
well-being. An absorbing meditation on this subject by the Department of Trade
and Industry in winter 2000 sought to find out if it was possible to measure
the quality of jobs6. Into the calculus it factored ‘external’ characteristics
such as work time, financial rewards, work-life balance, job security and
opportunities for advancement. ‘Intrinsic’ attributes included the role, the
content of the job, intensity, risk of illness, injury and so on.
It was not to be. The DTI report ends by rejecting the idea: "Job
quality as a cut-and-dried concept is not feasible unless one is prepared to
make value judgements about how important different job characteristics are in
relation to each other."
So is Bethune’s strategy for piloting happiness entirely daft? It would seem
not: adding a little is quite probably within his power. Did he go about it the
right way with his $100 bonuses and Ford Explorers? Questionable. Does
happiness result in better work performance? Sadly, we can’t answer that one.
1. Your Money or Your Life, Joe Dominguez and Vicki Robin, Penguin, 1999
2. Income and Happiness: Towards a Unified Theory, Richard Easterlin,
Economic Journal, July 2001
3. Happiness and Economics, Brune Frey and Alois Stutzer, Princeton
University Press, 2001
5. Public and Private Sector Perspectives on the Psychological Contract,
6. Job Quality and Job Security, Labour Market Trends, vol 108, October
Stephen Overell is commentary editor of XpertHR, a new
web-based information service bringing together leading information providers:
IRS, LexisNexis, Butterworths Tolley and Personnel Today. It features a new
Butterworths Tolley employment law reference manual, a research database and
guidance from 13 specialist IRS journals, including IRS Employment Review.