ABSTRACT
The link between wealth and wellbeing is vital for businesses that pay salaries to employees, generate incomes in their supply chains and create products that we all need money to buy.
The Easterlin paradox explains how as countries get richer, they don’t get any happier. It’s our relative position that counts. Once a certain income is reached, we can only get happier if we have more money compared to everyone else.
Even among the poorest in society, satisfaction with life has been shown to be remarkably high. This challenges the assumption that well-paid, quality work is essential for wellbeing. Once basic needs are met, there is a weak link between pay and life satisfaction. We adapt quickly as incomes rise.
Money is just one part of life. Increasing wages won’t necessarily improve our health, relationships and leisure time – the other domains that make for a full life.
Companies need a balanced and fair approach to salaries. Pay differentials – the gap between top leaders and average staff – should be kept in check. Non-financial rewards – such as holiday time, flexible working and recognition – typically have a much bigger effect on wellbeing than money.
