I'll trust that, by now, you've accepted that money only goes so far when it comes to making you happy--once you hit in the neighborhood of $75,000, your day-to-day experience doesn't get much of a boost.

But what if income level is only half the picture? What if what you're throwing the cash at matters, too?

As outlined in the Association for Psychological Science, psychological scientist Gordon D.A. Brown (University of Warwick) and economist John Gathergood (University of Nottingham) had a hunch it does. To check their hypothesis, the pair checked out the Panel Study of Income Dynamics (PSID), a survey that shows people's consumption patterns. They knocked out the richest 1 percent, as well as the poorest 1 percent, which left data from 5,660 individuals.

The researchers found that, while income didn't correlate with how satisfied people were with their lives, changes in what they consumed did. And the influence was the biggest when the spending was on more conspicuous purchases, such as clothes or vacations.

Unpacking the potential "why"s

The fact satisfaction improves best with conspicuous purchases suggests that there's something about buying items that others can notice that makes a difference. It could be that people have a preconception that they've somehow made it if they can show off a little through their pocketbooks. They might see those purchases as subtle symbols of status and feel happy that they finally can buy based on what they want as well as what they need.

But looking the other way, if there's a consensus about those items being socially desirable, then having those items might make others treat the buyers differently. We already know, for example, that hiring managers quickly assess candidates by what they wear to an interview. So maybe the ability to buy certain things eliminates some of the painful social hurdles that diminish joy.

But as the APS article notes, additional research from the University of Cambridge shows that people who can buy items that align with their personalities have greater life satisfaction compared to those who can't. That suggests that it's not any particular good or service that really matters, but rather the ability, within financial reason, to just be yourself and express who you are through your things or activities. Personal freedom makes a difference.

For even broader context, in her TED Talk, social psychologist Elizabeth Dunn notes that we also need to see the specific difference our dollars make when we give to charity in order for the donation to make us feel happy. That further implies that we get joy when our spending is connected to distinct purposes we feel personally connected to, when we feel like our money actually has some noticeable or measurable influence that proves the meaning for our lives.

 

3 implications for you as a leader

The first leadership application of the research is that, no, you don't have to necessarily break the bank paying ridiculous wage rates to have a workforce with great morale. Pay hikes aren't going to solve everything. But at the same time, a simple living wage might not cut it. These rates cover expenses, but they don't always leave employees room to explore who they are or who they want to become.

As an example, I probably can afford to go to my local dollar store and bling out my laptop with some 3D unicorn stickers. But when a great concert comes up I'd like to go to with a price tag of $75 or more per ticket before child care, most of the time, I don't get to dive into that part of myself, and in all honesty, I get a little miffed at the world.

Secondly, money is only part of the picture. Access is the rest. Even if an employee can afford to do what they enjoy or are interested in, satisfaction ultimately depends on their ability to go out and participate. They can't necessarily do that if they're working all hours and don't have good work-life balance.

So while it's reasonable to expect a good level of commitment to your business, you need to ask yourself if workers have time to buy and experience in ways that resonate with their core preferences and beliefs. You should think about ways to support them as people. That means letting them truly clock out, as well as connecting with them one-on-one to find out how to let them be freer.

If you know someone on your team loves art, for instance, you could find out about a free class they can sign up for. Or maybe you could show appreciation with a gift card to an art supply store instead of the usual catered lunch. And recommending them to a guru in your industry doesn't cost a dime, even as it can open doors to incredibly personal and deeply fulfilling projects.

Financial prudence is always wise. But poor and rich alike need to feel included and reasonably unrestricted. They need a sense of purpose. If you're not fostering those emotions through your behaviors and rates, if there is no choice in what your team members can do, then roll up your sleeves and do the hard work of changing your approach and policies. Ultimately, their joy will be what keeps your doors open and your wallet fat.  

Published on: May 3, 2019
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.