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Money can buy happiness if it’s spent on psychological therapy. That’s the conclusion of a recent study in Health Economics Law. A 4-month course of therapy costing approximately $1300 boosted well-being so much that it would take a pay raise of over $40,000 to achieve an equivalent well-being increase — suggesting psychological therapy is 32 times more cost-effective at making you happy than simply obtaining more money.
The reason therapy has greater impact on happiness and overall well-being than money is that it gets the person to take responsibility for their life. This leads to a sense of control and autonomy, which in turn heightens feelings of well-being overall.
The same dynamic applies to health improvement. Giving people money for doing something they should want to do for themselves robs them of the opportunity to gain control and autonomy of their life and their health.
The incentive dilemma
There’s a natural tendency to believe money is a big incentive in motivating behavior. Not in our experience. While we know of many instances where employees will elect different health plans, complete an HRA, or perform some other activity for a cash incentive, that’s not encouraging behavior change. You’re rewarding a task that, while it may have value, won’t change the way people go about their daily routine.
Money is a poor motivator because:
- People forget what they spent the extra money on, while a tangible item is an ongoing, visible reminder of an accomplishment
- In time, employees view cash as part of their overall compensation, not an "extra" for extra effort
- Tighter budgets make significant cash incentives available to fewer participants, while less expensive merchandise has perceived retail value.
Incentives are only tools to get people practicing a behavior until they experience the benefit personally. Take some time to examine your incentive strategy to see if you’re using the most effective incentive tools for long-term behavior change.