Does more money make you happier at work?

Story highlights

  • CEO reads article on happiness, gives employees a raise and cuts his own salary
  • Ron Friedman: CEO deserves applause, but connection between money and job happiness isn't long lasting

Ron Friedman is a social psychologist and author of the newly published book, "The Best Place to Work: The Art and Science of Creating an Extraordinary Workplace" (Penguin Random House/Perigee). The opinions expressed in this commentary are solely those of the author.

(CNN)It's not every day that a CEO voluntarily slashes his salary by 90% after reading an academic article.

Yet in the case of Dan Price, founder of Gravity Payments, that's exactly how it happened. After reading a study showing that for workers earning under $75,000 there's a strong connection between income and happiness, he made a decision. Within the next three years, he announced Monday, every employee at his company would earn at least $70,000. And he was going to shrink his million-dollar salary to make that happen.
Ron Friedman
It's a remarkable story. Especially in a world with stagnating wages, where most financial benefits go to those at the very top. It should be obvious to everyone that employees can't perform at their best when they're worried about making the rent, keeping the lights on or feeding their children. And yet at far too many companies, employee well-being is an afterthought.
    But with all the attention Price's generosity has drawn to the importance of income, it's worth noting that salary is only one ingredient of a satisfying job. And as it turns out, for many of us, it's far from the most important one.
    Put simply, if you're looking for a job that makes you happy, basing your decision on salary is likely to lead you astray. That's because the connection between salary and job satisfaction is weaker than we tend to assume.
    In 2010, Timothy Judge, a business professor at the University of Florida, set out to determine the real impact of salary on job satisfaction. To find out, Judge and his colleagues searched journal archives for every published study they could find measuring both salary and job satisfaction. They then combined the results into a single statistical analysis. All told, they looked at 86 different studies and evaluated the experiences of more than 15,000 employees.
    Their conclusion: "Level of pay had little relation to either job or pay satisfaction."
    Now, if you're like most people, these results are deeply at odds with your personal experience. We all know how exhilarating it feels to get a raise or land a job with a big paycheck. And yet the numbers tell us something completely different. How do we account for these findings?
    One explanation is that people tend to adapt to their level of income surprisingly quickly. If you earn $45,000 a year and receive word that your manager has just authorized a $5,000 increase, you can expect to feel pretty ecstatic. The question is, how long will that feeling last? A few days certainly. Maybe even a month. But a year from now, will you still be more satisfied with your job?
    It's a bit like driving a new car. You get a genuine thrill out of that first ride home from the dealership. Breathing in the new car scent, you can't help but notice all the ways your new vehicle is superior to your old one. But after a few weeks, it's all background. You go back to being the same person, albeit one holding a different set of keys.
    To be clear: A rise in income really does make us happier. It's just that the initial thrill doesn't last.
    Another reason the link between salary and job satisfaction is relatively weak is that in many cases, the promise of a big paycheck lures people to pursue jobs they don't really enjoy. In one study examined by Judge's team, "a sample of lawyers earning an average of $148,000 per year was less job-satisfied than a sample of child care workers earning $23,500 per year." That's more than six times the salary! And yet it still produced lower job satisfaction.
    There's a sobering message here. Financial wealth is nice. But not when it comes at the price of emotional bankruptcy. Being a lawyer can be incredibly fulfilling for some. It's just not for everyone.
    So what factors reliably contribute to satisfying work? Studies indicate that your best chances of finding workplace happiness lie in having a job that fulfills your basic, human psychological needs on a daily basis. As I explain in a new book on the science of work, we have decades of research suggesting that the most rewarding jobs are the ones that provide experiences that grow employees' competence, connect them to their colleagues in a meaningful ways and offer them autonomy in how they do their work.
    These are the essentials of satisfying work -- not lavish perks or fat paychecks.
    Not convinced? Then perhaps the following thought experiment might get you to reconsider.
    Suppose that you were offered a job that paid an annual salary of $200,000. All it required was that you arrive at the office every morning and stare at the wall, doing absolutely nothing, by yourself, for eight hours a day. Would you take it? If you did, chances are you'd be miserable. Not because you're not getting paid enough, but because your job fails to satisfy your human desires for building new skills, connecting with the people around you and having input into how you spend your time.
    All of which is to say that the best jobs do more than pay well. They provide psychologically satisfying experiences on a regular basis.
    Let's face it: Few companies out there will have the financial flexibility or willingness to follow Gravity Payments' example of setting a $70,000 minimum wage. Setting aside the question of whether or not they should, one thing is clear. Nearly every organization can do more to create rewarding workplace experiences. And they can do it without breaking the bank.