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Summer 2003 CalBusiness  
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Money Doesn’t Buy Happiness, According to Berkeley Study

Does money buy happiness? No. In fact, employees who are primarily motivated by the love of their work grow increasingly dissatisfied the more money they make, according to a recent study at Berkeley’s business and psychology departments.

The study found, as one may expect, that individuals who are motivated by extrinsic values, such as money, promotions, better office or parking spot, and other external rewards, were increasingly happy the more money they made.

More surprising, however, was the inverse relationship between those who were intrinsically motivated and their income. Intrinsically motivated people, or those who receive their satisfaction from doing the work for its own rewards, proved to be increasingly dissatisfied with their work and their lives the higher their salaries grew.

“In a capitalistic society, people generally believe that—all other things being equal—being rich is better. But that is not what we found,” said Jennifer Chatman, the Haas School’s Paul J. Cortese Distinguished Professor of Management, who collaborated with psychology Ph.D. candidate Ariel Malka on this research.

The researchers studied a group of 124 MBA students who completed their degrees between 1987 and 1992 at the Haas School of Business. They determined the students’ motivational orientation based on their responses to questions about jobs, career aspirations, and life circumstances. They then conducted a series of follow-up surveys to determine the participants’ job satisfaction and subjective well-being, in some cases 10-15 years after participants had received their MBAs (and participated in the study).

The survey findings have important consequences for how managers communicate the value of work and how they reward their employees.

“The important lesson for managers is that they don’t want the extrinsic rewards they give employees—raises, better offices, or bonuses—to displace or undermine the natural intrinsic rewards that people get for doing the work itself,” said Chatman.

External rewards do not necessarily preclude enjoying the intrinsic values of the work, the authors say. But presenting rewards for engaging in an already appealing activity can undermine that intrinsic motivation. As a result, individuals may misattribute their motivation and start to believe that they are extrinsically motivated because they work in or chose a higher paying job.

The conclusion to managers is to make sure that their employees are fully aware of the intrinsic merits of their work, and that they don’t fall into the trap of misattributing their eagerness to do the work to some external reward for that work.

“Individuals have a fundamental psychological need to feel as though their actions are freely chosen,” Malka and Chatman add. “In other words, we all need to feel that we are not just doing the work for the money, and intrinsically motivated individuals need to feel this even more so.”

The study alas does not prove that higher salaries are the cause of the unhappiness of intrinsically motivated individuals. Instead, these individuals may trade off the content of the work for better pay, leading them into a situation where they become unhappy because the work is unfulfilling. In other words, higher income might be an indication that a person neglected their own values in choosing a job.

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Jennifer Chatman
Not all employees are happier the more money they make, say Ariel Malka (psychology) and Jennifer Chatman (above).
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