Does Giving People Money Increase Their Happiness?

Money can’t buy happiness, but not having enough money can sure get in the way of it. Which raises the possibility: maybe you can improve people’s mental health simply by handing them some cash.

In a recent study, researchers in Italy, the United States and Zambia put that idea to the test. They did so by tracking the results of a program put in place by the government of Zambia to reduce poverty in specific regions of the country.

Under the program, women in poor households across rural Zambia were given unconditional cash payments that increased their household spending power by 27 percent on average. The payment, which came out to the equivalent of about $24 every two months, was calculated to provide one meal a day for each household member.

No doubt the women were happy to receive the money, but the researchers were more interested in what happened in the long term. So they followed up three and four years later to see whether the cash transfer had any effect on the women’s levels of happiness.

As it turned out, women who received the payment reported significantly higher levels of happiness than demographically similar women who didn’t. An important effect of the cash payment was that it increased women’s levels of satisfaction about the wellbeing of their children. In particular, they perceived their children as healthier and more likely to have good futures.

Considering these results, the researchers suggest that perhaps we should be taking psychological wellbeing and happiness into account when we evaluate possible government policies. This might sound obvious, but we commonly look at the economic bottom line and stop there when thinking about government policy. As the study of Zambia’s cash transfer program suggests, explicitly looking at how government programs impact happiness might help us make more informed decisions about what policies mean for society’s overall level of psychological wellbeing.

Image: Flickr/Ed Ivanushkin