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Can a $70,000 annual salary buy happiness, or at least start to limit income inequality?

There’s no silver bullet that will solve this problem for everyone, and tackling the issue of income inequality requires efforts on many different fronts.
There’s no silver bullet that will solve this problem for everyone, and tackling the issue of income inequality requires efforts on many different fronts.
©istockphoto.com/jhorrocks

They say money can’t buy happiness, but that’s only partly true. The reality is that happiness costs about $75,000 a year — or at least, that’s the conclusion of a 2010 study.

A study titled “High income improves evaluation of life but not emotional well-being” found that “[e]motional well-being also rises with … income, but there is no further progress beyond an annual income of $75,000.” This would be little more than an amusing anecdote, except for the fact that Seattle business owner Dan Price recently used this study to justify his decision to create a base salary of $70,000 per year at Gravity Payments, the credit-card processing company where Price works as CEO, formerly with a million-dollar-a-year salary. He has since slashed his own pay in order to increase the pay for his employees.

That’s putting your money where your mouth is.

Income inequality is one of the hot political issues of the day, and it’s shaping up to be one of the most prominent themes in the 2016 presidential campaign. The challenge is that, while everyone recognizes the problem, government is not particularly effective at providing workable solutions. President Obama has made reducing income inequality one of his top priorities, yet his commitment is more rhetorical than realistic. The nonpartisan Tax Policy Center has found that income inequality has actually increased during the Obama administration, and that the top 1 percent of earners collected 22.4 percent of all of the nation’s income in 2012.

Those statistics shouldn’t necessarily be interpreted as an indictment of the president’s policies on this subject. No matter how passionate the president may be to reduce the gap between rich and poor, his practical options to do so are limited. That same 1 percent that received 22.4 percent of all income also paid 35.06 percent of all federal income taxes. Government redistribution of wealth is a clumsy mechanism to alleviate poverty, and after decades of efforts by programs designed to do just that, the gap between rich and poor continues to widen.

Unfortunately, there’s no silver bullet that will solve this problem for everyone, and tackling the issue of income inequality requires efforts on many different fronts, such as increased education, developing a marketable set of professional skills, understanding and following sound personal financial practices and more. But there are individuals like Dan Price who are taking action where they live to try to help solve the problem one employee at a time.