Money Can Buy Happiness — If You’re Paid By the Hour

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Why are Americans such workaholics? The issue has long perplexed sociologists, who have put forth various theories on why workers in the U.S. tend to put in longer hours and take shorter vacations than their counterparts in Europe. Why do so many Yanks believe earning extra income is more important than enjoying leisure time?

Newly published research provides a possible answer. Americans, it turns out, are more likely to be paid by the hour than workers in most industrialized nations. And people who get paid an hourly wage are more likely to link well-being to income.

In the Personality and Social Psychology Bulletin, Sanford DeVoe of the University of Toronto and Jeffrey Pfeffer of Stanford University present evidence that being paid by the hour leads workers “to rely more on income when evaluating their happiness.”

“The prevalence of hourly pay — or, for that matter, billing time by the hour, or other organizational practices that affect the salience of a connection between time and money — is therefore a reasonable candidate for beginning to understand cross-national differences in the determinants of happiness, and also in preferences for work and leisure,” they conclude.

According to a 2002 paper by economist Daniel Hamermesh, the only industrialized country besides the U.S. in which hourly pay is fairly common is Australia. “There is no postwar tradition of hourly paid jobs in Western Europe,” he wrote in the Industrial and Labor Relations Review. He added that the percentage of American workers paid by the hour held steady or slightly increased from the late 1970s to the late 1990s, for reasons that are not at all clear.

Intrigued by such numbers, DeVoe and Pfeffer have been studying the psychology of the hourly wage for years now. In a 2006 paper, they reported that people paid by the hour “weighed economic returns more strongly in making tradeoffs between time and money.” They also found that “participants randomly assigned to calculate their hourly wage rate expressed greater willingness to trade more time for money.”

Their just-published paper looks specifically at the relationship between wage structure and happiness. It describes four studies.

One used data from the first wave of the National Survey of Families and Households, a cross-sectional survey of American adults conducted in 1987-88. Participants were asked their income and whether they were paid a salary or an hourly wage. To measure happiness, they were asked: “Taken things all together, how would you say things are these days?”

The researchers found that after controlling for various factors, including the number of hours worked, the person’s education level and marital status, “income had a greater effect on happiness for those employees paid by the hour.”

In another study, salaried participants were asked to calculate their approximate hourly wage rates and then evaluate their subjective feelings of well-being. These people “exhibited a relationship between income and happiness similar to those of people normally paid by the hour,” the researchers report.

This strongly suggests the x-dollars-per-hour equation is simple and concrete enough to make a huge psychological impact. We may shrug off the fact we’ve “wasted” an hour doing nothing, but “wasting” $26.74 is something else entirely.

Ben Franklin advised us to “remember that time is money.” The American economic system, for better or worse, seems to be structured in a way that keeps that adage alive.

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