01/28/2013 04:46 pm ET Updated Mar 30, 2013

Research Shows That Happier Children Earn Higher Wages Later in Life

There is quite a bit of debate about the scientific validity of the proverb "money can't buy happiness," because studies on this topic have resulted in discordant results. Some studies support the idea that richer people are happier on average than poor people, but there are also reports that while the median income in the U.S. has grown in recent decades, average happiness among Americans has hardly changed.

The researchers Jan-Emmanuel De Neve and Andrew Oswald decided to study the link between happiness and income from a very different angle. Instead of asking whether more money leads to more happiness, they reversed the question and asked whether more happiness leads to more money. In the paper "Estimating the influence of life satisfaction and positive affect on later income using sibling fixed effects" published in the Proceedings of the National Academy of Sciences, De Neve and Oswald use in-home surveys and interviews of about 15,000 adolescents and young adults in the U.S., assessing their "positive affect" (a technical term to indicate "happiness" or "well-being") at ages 16, 18 and 22. The researchers then analyzed the annual earnings of these adolescents or young adults once they reached the age 29. They found that their degree of happiness at a young age had a major role in predicting their future income. For example, 16-year-olds who scored in the lowest happiness category went on to earn about $28,000 per year at age 29, while those who scored in the highest happiness category earned roughly $38,000!

Since happiness at a young age could merely reflect the family environment or family income, the researchers also corrected for this by directly comparing the happiness of siblings growing up in the same family. It turned out that the same relationship between happiness at a young age and higher future income held true. Happier siblings who grew up in the same family were far more likely to earn more money as adults than their less happy siblings. The researchers also tried to uncover possible reasons for why happier adolescents go on to earn more money as adults. Their statistical analysis found that a higher likelihood of obtaining a college degree, getting hired and promoted, having an optimistic outlook and being an extrovert were all possible mediating factors that led to the higher income of happier children. How the happiness of the younger child impacted these factors could not be determined and the study also did not provide data on whether happiness at younger ages was associated with better academic performance.

This was an observational study which evaluated statistical associations, but could not assess direct cause-effect relationships nor did it test whether an intervention at a young age can actually make a difference. If we found ways to help children become happier at age 16 (as a parent, I know that this can be quite challenging!), would that necessarily mean that they would earn more money when they grow up? We need more research to definitively answer this question and then identify the potential interventions that would be effective. One has to also bear in mind that this study was conducted in US adolescents and may not apply to other societies or cultures. The fact that extraversion and optimism were associated with a higher income is a reminder that introverts often face challenges at work and may lose out in terms of promotions and earnings to colleagues who exude a lot of optimism and cheerfulness. If this study had been conducted in other societies where there isn't such peer pressure to be cheerful and optimistic, the results may have been very different.

As a society, we should try to maximize the happiness of children, purely for ethical and altruistic reasons and not because it makes them better earners. However, we live in an environment where terms such as "fiscal responsibility" are thrown around as an excuse to cut budgets for schools and for important educational and community programs. This study provides some data to show that investing in the happiness of children may indeed be "fiscally responsible" and yield returns that can be measured in actual dollars.

An earlier version of this article was originally published on the Fragments of Truth blog.