Review case Money Doesn't Buy Happiness. Well,on Second Thought . . . and response the below:
If money can't buy you love, can it still buy you happiness? A now famous1974 study seemed to indicate that the answer was no. U.S.economist Richard Easterling, then at the University of Pennsylvania, studied comparative data on moderately wealthy and very wealthycountries and concluded that although rich people are happier thanpoorer people, rich countries are not happier than poorer ones,and they do not grow happier as they grow increasingly rich. Theexplanation for this apparent paradox, said Easterlin, was that onlyrelative income-your income compared to that of your peers andneighbors-matters to happiness, not absolute income.Now, however, two Wharton professors, Betsey Stevenson andJustin Wolfers, say that the Easterlin paradox, as it has came to becalled, does not exist. Based on new research, they say that the truthisn't paradoxical at all, but is in fact very simple: "1. Rich people arehappier than poor people. 2. Richer countries are happier than poorercountries. 3. As countries get richer, they tend to get happier."Pointing out that 35 years ago Easterlin had little data to workwith, Stevenson and Wolfers draw their conclusions from data aboutmore countries, including poor ones, over longer periods of time.Public opinion surveys and other studies show that life satisfactionis highest in richer countries. In the United States, for instance, 9in 10 Gallup Survey respondents in households making more than$250,000 a year called themselves "very happy," compared to only4 in 10 with incomes below $30,000. "On balance," Stevensonand Wolfers conclude, "GDP and happiness have tended to movetogether." The bottom line, they say, is that absolute income matters.What do these new findings mean in practice? A pair of Britisheconomists suggest that government's policy goals should focusless on growing GDP and more on improving measures thatdirectly affect happiness.Easterlin would probably agree. He now concedes thatpeople in wealthy countries do report more happiness than thosein poorer countries. But he still doubts that money alone is thereason. Comparing Denmark and Zimbabwe, for instance, hesays, "The Danes have social welfare policies directed towardsome of the most salient concerns of families-their health,care for the aged, child care. If you ask why the Danes arehappier, an alternative hypothesis is they have a set of public policies that deal more immediately with people's fundamental concerns."In addition, the tiny Himalayan kingdom of Bhutan has, in fact,replaced GDP with a measure it calls "gross national happiness."
Questions
1. What do you think is the role of money as a determinant of aperson's satisfaction at work and with life in general? Shouldorganizations worry about this issue? Explain.
2. Firms vary widely on the extentto which they emphasize money as an incentive. Do youthink an emphasis on financial incentives is good or bad? Explain.
3. For the past 90 years or so, job evaluation as a compensationtool has been designed to assess the value of each jobrather than to evaluate the person doing the job, promptinga relatively flat pay schedule for all incumbents in a particularposition. Some HR experts believe that the emergingtrend is for pay inequality to become "normal." Employersare using variable pay to lavish financial resources on theirmost prized employees, creating a kind of corporate starsystem. "How do you communicate to a workforce thatisn't created equally? How do you treat a workforce inwhich everyone has a different deal?" asks Jay Schusterof Los Angeles-based compensation consultants Schuster-Zingheim& Associates, Inc. If you were asked these questions,how would you answer them? Given the issues just discussed in this case, what effect do you think this trendtoward greater pay inequality will have on employees'satisfaction with their pay, their job, and life in general?Explain.