Why does more money change us

Economy: What money does to us


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It's just numbers on a computer screen, a few worn pieces of metal in your pocket, or a handful of wrinkled paper. Money is pretty unspectacular - and one of mankind's greatest inventions. Money is the engine of the market economy and a promise that attracts thousands of people to the lottery kiosks. Economists and sociologists have been researching for decades how money changes our lives. Does it make you happy? Satisfied? Healthy?

One of the most valuable sources for researchers is the socio-economic panel (SOEP) of the German Institute for Economic Research. Since 1984, employees of the institute have visited around 11,000 households in Germany every year and surveyed the study participants about income, occupation, state of health and how satisfied they are with their life. In this way, a large data set was created that allows insights into the living conditions and emotional states of more than 20,000 representatively selected people. Above all, the data allow a better answer to the question of what money is doing with us and whether it is always worth the hunt for it.

First of all, the bad news: Money doesn't make you happy. At least most of the time not. A whole series of studies shows that even if income is increasing and people have more and more money on their way, they usually do not get happier. "Even a loss of income does not in itself lead to a deterioration in life satisfaction," says Jürgen Schupp, who heads the SOEP in Berlin.

The researcher's results confirm the American economist Richard Easterlin, one of the pioneers of economic happiness and money research. As early as 1974, Easterlin compared life satisfaction surveys with statistics on economic growth. Although the standard of living in the boom after World War II had risen significantly over the years, especially in the USA, Americans were not getting any happier, observed Easterlin somewhat amazed. A problematic finding for economists: They rated policy measures primarily according to whether total income would rise. In doing so, they follow the assumption that more material prosperity also means more happiness in life. Easterlin's research therefore went down in economic history as the Easterlin Paradox.

However, even then, Easterlin suspected that money can very well make you happy. But only if you have more of it than your neighbor. The rich don't get happier when they get richer, observed Easterlin. But they are generally happier than the poor. So what counts is not what you can buy with all that money. Rather, what is important is the social status that wealth brings with it. If everyone gets wealthier at about the same rate and social hierarchy does not change, then life satisfaction will also remain the same. Then it comes to the Easterlin paradox.

Men especially like to compare each other

The economist Jürgen Schupp was able to measure the importance of comparing people with other people when it comes to money three years ago using data from the SOEP. Together with two colleagues, he evaluated the questionnaire from 2008, in which some new questions were added to the interview sheets. This time, the respondents also had to indicate how much they earn compared to work colleagues, friends and neighbors.

If a promotion leads to someone earning more than their work colleagues from now on, more money actually means more happiness, according to the researchers' data. Men in particular orientate themselves strongly to their social environment. Only if a jump in salary makes you the richest in the comparison group will you be satisfied with the money. Women, on the other hand, compare themselves less with others and therefore do not take the race for the highest salary so much to heart.

So unless you shoot straight to the top of the salary table, more money is less likely to make you happy. But does it at least make you healthy? After all, the well-off have less physical hard work and can afford better medical treatments. In fact, a study based on SOEP data shows that high earners live longer. Women with little wealth die on average 3.5 years earlier than wealthy women, a research team led by researcher Hannes Neiss found out. The effect is even stronger in men: statistically speaking, low-wage earners die five years younger.